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Forex Daily Overview

USD higher as stocks slide and risk appetite fades

Fri, Oct 30 2009, 18:42 GMT
by Michael J. Malpede

Easy Forex

• USD: Higher, stocks slide, consumption slows, Chicago PMI strong, consumer confidence dips
• JPY:Higher, stocks slide, consumption slows, Chicago PMI strong, consumer confidence dips
• EUR:Lower, consumer prices fall ,unemployment rises, German retail sales slip
• GBP: Lower, Consumer confidence rises, Fitch downgrades seven UK building societies
• CAD and AUD: AUD & CAD lower, Australia’s credit demand slows, Canada’s GDP declines, CRB drops
  

Overview

USD and JPY edged higher Friday supported by a modest drop in risk appetite as the equity market rally stalls. JPY rallied in reaction to report that the BOJ will end its bond support plan. EUR was pressured by report that EU inflation outlook remains negative and unemployment continues to rise. GBP failed to hold early gains sparked by report of improving consumer confidence pressured by a Fitch down grade of seven UK building societies. Commodity currencies traded lower with AUD pressured by report of weaker private sector credit and CAD
pressured by report of an unexpected a decline in Canada's GDP. US economic data was mixed with personal income flat and personal consumption declining, labor costs remain soft, Chicago PMI came in much higher than expected and Michigan consumer sentiment was revised lower.
Next week's focus turns to the conclusion of the Fed’s policy meeting Wednesday and Friday's release of US unemployment. The trade will be looking to see if the Fed begins an exit strategy and drops language about keeping interest rates low for an extended period. Risk sentiment remains the driving factor for FX trade with USD consolidating Thursday's sharp losses sparked by report of better than expected US advanced Q3 GDP. US Treasury Secretary Geithner says the US economy is in the early stages of recovery but risks remain. Next week's US unemployment report will be key to investor risk sentiment and speculation about whether the US
recovery is sustainable. Reuters reports that George Soros says that the global recovery may run out of steam and the risk of a double dip recession is real. FX price direction remains closely correlated to equities and risk sentiment.

Today’s US data: 

September personal income flat, a rise of 0.1% was expected September consumption declined by 0.5% as expected. Chicago PMI rose to 54.2, a reading of 49.1 was expected Michigan consumer sentiment was revised to lower to 70.6 from 73.5, a reading 69.4. Q3 employment cost index was unchanged at 0.4%.

Upcoming US data: 

Next week's US economic calendar includes the November 2nd release of September construction spending expected at -0.3% compared to 0.8% last month. October ISM and September Pending Home Sales Index will also be released on November 2nd. The ISM is expected at 53 compared to 52.6 last month and pending home sales index is expected at 105.7 compared to 103.8 last month. On November 3rd September factory orders will be released expected at 1% compared to -0.8% last month along with domestic auto sales for October. The FOMC begins a two policy meeting on November 3rd. On November 4th October ADP employment and nonmanufacturing ISM Index will be released. The ADP report is expected at -188k compared to -254k last month and nonmanufacturing ISM is expected at 51.8 compared to 50.9 last month. On November 5th initial jobless claims for week ending 10/31 will released expected at 521k compared to 530k last week. Q3 productivity and unit labor costs will also be released on November 5th. Q3 productivity is expected at 5.5% compared to 6.6% last month and unit labor costs are expected at -4.5% compared to -5.9% last month. On November 6th October nonfarm payroll and unemployment will be released. The nonfarm payroll is expected at -175k compared to -263k last week and the unemployment rate is expected to rise 0.1% to 9.9%. 

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Published on  Fri, Oct 30 2009, 18:47 GMT