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European and US summary

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Greenback Slides on Shift to Risk

Tue, Dec 1 2009, 22:29 GMT
by Korman Tam

Forexnews.com

12/1/2009 2:44 PM: EUR/$..1.5102 $/JPY..86.59 GBP/$..1.6637 $/CHF..0.9979 AUD/$..0.9259 $/CAD..1.0434

Greenback Slides on Shift to Risk

Markets stabilized further in the Tuesday session with the dollar sliding against the majors, while global equity bourses rallied and spot gold surged to a new record high above the $1,200 per ounce level. Tokyo’s Nikkei index climbed by over 2.4% on Tuesday while Germany’s DAX index rallied by nearly 2.7% and the Dow Jones improved by more than 1.5% by afternoon trading.

Philadelphia Fed President Plosser delivered an optimistic assessment on the economy earlier, expressing his confidence that the economy is in a sustainable recovery and expects GDP growth around 3% over the next two years. He suggested it may become appropriate to tighten interest rates before unemployment has dropped to acceptable levels with the need for extraordinary Fed liquidity to continue to dissipate in the coming months. Plosser added that withdrawing liquidity in a timely way is the key to keeping inflation expectations stable. He does not anticipate very strong growth in consumer spending in the coming quarters but believes the long decline in housing activity to have bottomed. Plosser also expressed a neutral outlook on price stability in the near-term, saying risks for both inflation and deflation to be mostly benign.

The economic reports that were released today included November manufacturing ISM and pending home sales for October. The November manufacturing ISM report fell by more than estimated to 53.6 compared with calls for a decline to 55.0 from 55.7 in October. The prices paid component fell to 55.0 from 65.0 in the previous month. Meanwhile, the pending home sales report sharply beat out forecasts for a decline of 0.8%, instead improving by 3.7% in October versus a downwardly revised 6.0% reading in September.

Traders will look ahead to Wednesday’s ADP private sector payrolls report as a proxy to Friday’s key jobs data. The ADP payrolls reading is seen revealing a loss of 175k jobs in November versus 205k jobs lost a month earlier. The November unemployment rate is estimated to hold steady at 26-year highs at 10.2% while the non-farm payrolls are seen shedding 130k jobs.

Euro Propped Higher

The euro recovered above the 1.51-level against the greenback despite weak Eurozone labor data. The euro benefited from a return to riskier assets as fears from Dubai continued to subside. The October Eurozone unemployment rate edged up to an 11-year high at 9.8% while Germany’s unemployment rate held steady at 8.1%.

EURUSD will encounter interim resistance at 1.5120, followed by 1.5160 and 1.52. Subsequent ceilings are eyed at 1.5230, backed by 1.5270 and 1.53. On the downside, support begins at 1.5050, followed by 1.50 and 1.4965. Additional floors are eyed 1.4930, backed by 1.49 and 1.4860.

Published on  Tue, Dec 1 2009, 22:30 GMT