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Forex Daily Overview

USD lower as stocks rise to the days highs after ISM

Wed, Nov 4 2009, 17:54 GMT
by Michael J. Malpede

Easy Forex

• USD: Lower, ADP employment comes in near expectation, non- manufacturing ISM drops
• JPY:Lower, pressured by improving risk appetite
• EUR:Higher, EU PPI declines for the ninth straight month , services PMI rises
• GBP: Mixed, services PMI rises to a two-year high
• CAD and AUD: AUD & CAD higher, crude prices rise above $80 a barrel, gold hits fresh record high

Overview

USD and JPY traded lower ahead of today's FOMC policy decision pressured by a rebound in risk appetite as global equity markets rally. Global equity markets were supported by report of improving US October auto sales, an upgrade of China's growth outlook from the World Bank and firmer bank stocks. GBP was supported by report the UK services PMI rose to its best level in two years. EUR traded higher with gains limited by report that EU PPI declined for its ninth straight month and in reaction to report that Fitch cut Ireland’s rating. Fitch said the rationale for the Ireland rating cut was weak GDP and rising government liabilities. Commodity currencies traded higher tracking the rise to a record level in the price of gold and crude prices rising above $80 a barrel. AUD gains were limited by report of weaker than expected Australian retail sales. The retail sales decline may make a December RBA rate hike less likely. October ADP employment declined for the seventh straight month and Challenger October job cuts were 51% lower than a year ago. These reports suggest that the pace of US nonfarm job losses likely slowed in October. Non-manufacturing ISM came in slightly lower than expectation.

The ECB and BOE meet on Thursday. The ECB is expected to leave monetary policy unchanged. There is great uncertainty over whether the BOE will elect to expand its asset purchase program as UK GDP posted a negative result. US October unemployment will be released Friday. US unemployment is expected to rise to a new 26 year high but nonfarm payroll job losses will likely be less than 200k. The US unemployment report will be key to investor risk sentiment and speculation about whether the US recovery is sustainable. FX price direction remains closely correlated to equities and risk sentiment.
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Today’s US data: 

October ADP employment declined by 203k, a reading of -190k was expected. October non manufacturing ISM came in at 50.6 compared to 50.9 last month, a reading of 51.8 was expected. FOMC statement will be released at 19:15GMT...

Upcoming US data: 

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  Wed, Nov 4 2009, 17:59 GMT