USD - Clearly the downtrend in the USD has continued over the last several trading sessions. Major economic news will be released this week, starting with ISM non-manufacturing Tuesday and followed by ECB interest rate statement Thursday… and, of course, non farm payrolls on Friday. If you are swing trading, look for bounces in the USD to get short. If you are intraday trading, watch for a strong trend of the day (in either direction) and stick with it. Do not get caught trying to pick tops or bottoms in this market… the volatility is to high and the moves are too big.
EUR - I retain the view that robust growth and ample liquidity growth will imply that the Bank remains vigilant to the upside inflation risks. A tighter labour market should eventually put upside pressure on wages and inflation and should continue to keep the ECB vigilant to the upside risks to price stability and still favour more rate hikes in early 2007.
GBP - Sterling was unable to strengthen through the 0.6720 level against the Euro on Monday and was also blocked below 1.9850 against the US dollar. The UK currency drifted weaker in early Europe on Tuesday after another disappointing retail sales report with a move to 1.9750 against the dollar.
JPY - The BoJ's Mizuno has fuelled further yen gains after raising the possibility of a BoJ hike in rates. For the moment the market doesn't see a rate hike before the first quarter of next year, but this may be the first sign that overall the BOJ maybe more hawkish in the future.
AUD - A combination of rising interest rates, falling consumer confidence, the extended period of high gasoline prices and the worsening drought are all taking their toll on service sector activity. Significant headwinds will continue to buffet the economy as we move into 2007. It is apparent that a sustained period of stable interest rates would greatly assist the service sector in finding its feet in 2007. There is obviously no expectation that the RBA will look to change rates tonite. The ... market has now virtually priced out the possibility that the RBA could hike rates in the first quarter next year.
CAD - The Bank of Canada is expected to announce that it will keep its interest rate unchanged at 4.25% on Tuesday morning. USD-CAD is holding on to 1.1375-1.1400 support ahead of today’s BoC meeting. Any strong acknowledgement of the recent softer growth phase could weigh further on the CAD. The main support for the CAD at the present time is the fact that the market is already short. Net spec CAD shorts on the IMM did fall as of last Tuesday from 58.893 contracts to 40,282 –although the latter is still a sizeable position. Upside is favoured on USD-CAD in the short-term while above 1.1375-1.1400.
EUR - I retain the view that robust growth and ample liquidity growth will imply that the Bank remains vigilant to the upside inflation risks. A tighter labour market should eventually put upside pressure on wages and inflation and should continue to keep the ECB vigilant to the upside risks to price stability and still favour more rate hikes in early 2007.
GBP - Sterling was unable to strengthen through the 0.6720 level against the Euro on Monday and was also blocked below 1.9850 against the US dollar. The UK currency drifted weaker in early Europe on Tuesday after another disappointing retail sales report with a move to 1.9750 against the dollar.
JPY - The BoJ's Mizuno has fuelled further yen gains after raising the possibility of a BoJ hike in rates. For the moment the market doesn't see a rate hike before the first quarter of next year, but this may be the first sign that overall the BOJ maybe more hawkish in the future.
AUD - A combination of rising interest rates, falling consumer confidence, the extended period of high gasoline prices and the worsening drought are all taking their toll on service sector activity. Significant headwinds will continue to buffet the economy as we move into 2007. It is apparent that a sustained period of stable interest rates would greatly assist the service sector in finding its feet in 2007. There is obviously no expectation that the RBA will look to change rates tonite. The ... market has now virtually priced out the possibility that the RBA could hike rates in the first quarter next year.
CAD - The Bank of Canada is expected to announce that it will keep its interest rate unchanged at 4.25% on Tuesday morning. USD-CAD is holding on to 1.1375-1.1400 support ahead of today’s BoC meeting. Any strong acknowledgement of the recent softer growth phase could weigh further on the CAD. The main support for the CAD at the present time is the fact that the market is already short. Net spec CAD shorts on the IMM did fall as of last Tuesday from 58.893 contracts to 40,282 –although the latter is still a sizeable position. Upside is favoured on USD-CAD in the short-term while above 1.1375-1.1400.
posted by Naveen Pantera at 6:00 PM
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