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- Nov, 20 US Dollar, Japanese Yen Surge on Risk Aversion as Dell Earnings Disappoint
- Nov, 19 US Dollar Advances as Nikkei Leads Stocks Lower in Asian Trading
- Nov, 18 Currency Markets May Look Past BOE Minutes, Focus on US Inflation and Housing Data
- Nov, 17 Greenback Finding Some Support into European Trade
- Nov, 13 Euro Vulnerable If Third-Quarter GDP Continues to Show Weak Private Sector
- Nov, 12 Australian Dollar Hits Fresh Yearly High as Jobs Data Boosts Rates Outlook
- Nov, 11 British Pound in Focus as BOE Reveals Inflation Report, Jobless Rate Hits 12-Year High
- Nov, 10 Pound Tumbles on UK Credit Outlook, Euro Exposed with ZEW to fall for Second Month
- Nov, 09 New Zealand Dollar Soars on Exports Outlook, USD Sinks Amid Bets on Dovish Fed
- Nov, 06 Currency Markets to Look Past European Economic Data, Focus on US Jobs Report
- Nov, 05 British Pound in Focus with BOE Set to Expand Stimulus, Likely Inaction from ECB
- Nov, 04 Euro in Focus as Producer Prices Fall For Ninth Month, Threatening Continued Deflation
- Nov, 03 Australian Dollar Falls Despite Interest Rate Hike as RBA Hints Shift to Neutral
- Nov, 02 US Dollar May Correct Lower but Risky Assets are on Shaky Ground
- Oct, 30 Japanese Yen Gains as BOJ Ends Corporate Bond Scheme, Jobless Rate Drops
- Oct, 29 US Dollar May Extend Gains as Dismal European Data Fuels Risk Aversion
- Oct, 28 Euro May Extend Losses as German Inflation Shrinks, Paring Bets on ECB Rate Hikes
- Oct, 27 US Dollar Consolidates Gains, Australian Business Confidence Hits 15-Year High
- Oct, 26 US Dollar Falls as Asian Stocks Advance on Earnings, South Korea GDP
- Oct, 23 Euro Gains in Focus Ahead of IFO, PMI Data; UK GDP May Disappoint in Third Quarter
The Euro may face strong resistance as prices inch towards the key 1.50 level against the US Dollar with September’s Producer Prices data likely to show the single currency’s appreciation has helped stoke deflationary pressure, threatening stronger action from the ECB.
Key Overnight Developments
• RBA Minutes Hawkish as Expected, Currency Markets Unmoved
• Euro Inches Higher, British Pound Consolidates in Overnight Trading
Critical Levels
The Euro trended slightly higher in overnight trading, reaching just below 1.50 to set a high of 1.4994 only to retreat back towards the session open at 1.4965. The British Pound consolidated in a narrow triangle around the 1.64 level.
Asia Session Highlights
Minutes from October’s policy meeting of the Reserve Bank of Australia struck a predictably hawkish tone considering it was the first monetary authority to hike interest rates in the aftermath of last year’s global financial crisis and credit crunch. Governor Glenn Stevens and company reckoned it would be “imprudent” to keep rates too low for too long, saying this could lead to imbalances in the economy. Policymakers added that while the impact of government stimulus is on the decline, the economy will grow approximately in line with its long-term trend in 2010. On prices, the RBA said that inflation may be slow in the near term with a pickup by 2011, but noted that Australian Dollar gains may contain upward pressure. With little that was not already priced into the exchange rate, the currency market’s reaction to the publication was fairly tame: AUDUSD briefly tested above 0.93 but quickly retreated to consolidate in a narrow 30-pip range below the big figure for the remainder of the overnight session.
Euro Session: What to Expect
German Producer Prices are set to drop -0.1% in September to push the annual pace of wholesale price deflation to -7.1%. Energy prices were the main contributor to the shallow rebound in August and are likely to factor into any move lower this time around having slipped -0.1% in September after four consecutive months of gains. The stronger Euro likely magnified downward pressure: the single currency gained 1.7% last month against a trade-weighted average of its top counterparts, making imported raw materials and intermediate goods comparatively cheaper to European buyers. To that effect, the potential fallout from continued Euro strength goes beyond damage to the export sector in that it could encourage deflationary forces and foster expectations of lower prices in the future, creating incentives for consumers and businesses to wait for the best possible bargain and hold off on spending and investment. While the European Central Bank has so far only vaguely hinted at displeasure with the Euro’s appreciation, traders will be looking for a more aggressive posture should prices meaningfully break above the psychologically significant 1.50 level against the US Dollar, which may translate into considerable headwinds as the bulls try to take out this key juncture.
In the UK, Public Sector Net Borrowing is expected to show the monthly fiscal deficit narrowed slightly to 15.5 billion pounds in September from 16.1 billion pounds in the previous month. The data is unlikely to prove particularly encouraging for sterling however with economists continuing to forecast a budget gap amounting of 12.6% on average this year and in 2010, the largest in the G10, that will almost surely see sharp spending cuts and a period of sluggish growth after as policymakers are invariably forced to trim expenditures and raise taxes to cover the shortfall.
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