Rational FX: Positive sentiments in Europe result in losses for Dollar [13/01/2011]

Rational FX: Positive sentiments in Europe result in losses for Dollar [13/01/2011]
Yesterday’s Economic Data

We have seen a reversal of Dollar gains on the back of positive sentiments from Europe. If however Portugal change there mind about a bail out the Euro will continue its downward trend against the US Dollar.

Yesterday’s Market Movers

  • UK Goods Trade Balance for November came out yesterday which was worse than expected. This could be a result of a stronger pound making exports less attractive; I also believe that the bad weather had an impact on goods being ordered as delivery became a real issue. The Pound strength has also made imports more attractive.
  • Industrial production also came out in the Euro zone better than expected. A weaker Euro may have helped plus confidence has grown over the year in the EU.
  • In the US Yesterday we had the MBA mortgage Applications which is considered a vital piece of data for the U.S Housing market, with this figure coming out lower than the previous figure of 2.3%, It shows the housing market for the US approved fewer applications or there were fewer applications made! This could be seasonable, but if the trend continues it may encourage the US to increase their fiscal stimulus package.
  • Also in the US we have the Import Price index Mom and YoY. MoM was expected to come out slightly less than previous at 1.2%; it came out a fraction less at 1.1%.  The Dollar did weaken yesterday but I don’t feel that this had any impact on it. It could be that there has been an increase of risk appetite after Portuguese bond sales and them stating that they will not need a bail out.
  • The FED’S beige book reports were the last piece of data for yesterday. This was a key indicator on the US’s current economy situation where the 12 members of congress met on ‘Capitol Hill’. Strong improvements were seen throughout the state of Boston, New York and Philadelphia; the other states were showing only fractional improvements.

Today’s Market movers

  • In the UK early this morning we have the ‘Industrial Production’ data released with a previous figure of -0.2% which is expected to come out better with a figure of 0.5%.
  • Also in the UK we have the ‘Manufacturing Production’ data for YoY and MoM with both pieces of data expected to come out weaker. The bad weather may have had an impact on this.
  • Around the lunch period we have Trichet’s speech where he will discuss the common trends of the Euro in the short term; Bloomberg quoted this morning that ‘Trichet’s final year could the most important yet’. Traders will be watching to see if there are any hints surrounding interest rates and what he thinks about the weaker economies within the EU!
  • UK BoE ‘Interest Rate’ decision is coming out at midday with it expected to remain at 0.5%.
  • Eurozone also have their ‘Interest Rate’ decision out at 12:45pm with it expected to remain the same at 1%.
  • In the US today we have the ‘Trade Balance’ data out with just the consensus given at $-38.71B, is will show the balance of import/export in goods and services throughout the country.
  • Bernanke is speaking at 6pm. Again traders will be watching to see if he hints towards interest rate movement or further stimulus within the US.

Currencies
High
Low
Support
Resistance
GBP/EUR
1.2045
1.1989 
1.1920
1.2060
GBP/USD
1.5768
1.5579
1.5660
1.5880
EUR/USD
1.3115
1.2960
1.3030
1.3250
We wish you a very nice day.

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