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European and US summary

Greenback Relinquishes Gains on Oil

Wed, Jul 30 2008, 22:45 GMT
by Korman Tam

Forexnews.com

7/30/2008 3:20 PM: EUR/$..1.5568 $/JPY..108.06 GBP/$..1.9809 $/CHF..1.0483 AUD/$..0.9432 $/CAD..1.0231

Greenback Relinquishes Gains on Oil

The dollar backed away from its gains versus the majors by afternoon New York trading, relinquishing a five-week high against the euro at 1.5523 to fall back near the 1.56-handle. The greenback initially received a boost from the better-than-expected ADP private sector payrolls report but later succumbed to a combination of profit taking ahead of key US economic reports starting tomorrow and a $4.58 rebound in oil to $126.71 per barrel.

The ADP private sector payrolls defied consensus estimates for a loss of 60k jobs in July, following a 79k loss a month earlier, instead increasing by 9k jobs. Traders quickly rewarded the dollar following another bout of upbeat economic data, reacting in similar fashion to yesterday’s better-than-forecast consumer confidence survey. However, the euphoria was short-lived as oil extended its rally and markets shift focus to several potentially dollar negative reports in the remainder of the week.

The US reports scheduled for release tomorrow include the advanced reading for Q2 GDP, weekly jobless claims, July NY NAPM manufacturing and the July Chicago PMI. The advanced reading for GDP in Q2 is seen improving to 2.0% from 1.0% in the previous quarter. The Chicago PMI reading is seen remaining beneath the key 50-level for the 6th consecutive month, expected to decline to 49.0 from 49.6 and highlighting continued weakness in the US manufacturing sector. Although the report has been steadily improving since hitting a 7-year low in February at 44.5, it has remain mired in contraction territory for six months and is seen slipping lower from the previous month.

 
Euro stabilizes from lows

The euro recovered against the dollar after falling to its lowest level since June 24th at 1.5520 on the heels of a rebound crude oil. Germany’s jobs data are due out in the coming session, with the unemployment rate for July expected to remain unchanged at 7.8% and the unemployment change at -20k from -38k in June. The Eurozone June unemployment rate is also expected to stand pat at 7.2%, while the July flash inflation is seen creeping higher to 4.1% from 4.0% previously.

EURUSD hovers near 1.5570 in the New York afternoon. We look for the single currency to rebound slightly overnight with gains likely to be capped just beneath 1.5650. In the medium-term however, the euro is seen probing lower with initial support expected around 1.5500-30, and a breach of which will pave the way for further losses toward 1.53.

Published on  Wed, Jul 30 2008, 22:46 GMT

Archive

• Yen Rallies, Traders Await Jobs
  Published On Sun, Sep 7 2008, 14:33 GMT
• Oil Loses Ground, USD Higher
  Published On Tue, Sep 2 2008, 23:26 GMT
• JPY, USD Climbs Higher in Thin Trading
  Published On Mon, Sep 1 2008, 21:28 GMT
• Q2 GDP Props USD
  Published On Thu, Aug 28 2008, 22:38 GMT
• USD Gains on Data
  Published On Tue, Aug 26 2008, 22:58 GMT

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