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FOREX: US Dollar Recovery Hinted as S&P 500 Index Futures Slide

By , Currency Strategist
19 October 2011 07:48 GMT

Talking Points

  • US Dollar Slides on Rumors Germany, France Agreed on EFSF Expansion
  • S&P 500 Futures Drop, Hinting Return to Risk Aversion is Around the Corner
  • Bank of England Minutes to Reveal Extent of Dovish Shift After QE Reboot

The US Dollar is once again the defensive as markets react to a story in The Guardian claiming that Germany and France have reached an agreement to boost the EFSF bailout fund to 2 trillion euro, stoking risk appetite amid renewed hopes that the EU debt crisis will be contained and weighing on demand for the safe-haven benchmark currency. Markets seemed to shrug off countervailing news that Moody’s downgraded Spain’s credit rating once again.

Interestingly, S&P 500 stock index futures warn optimism may prove fleeting, with contracts tracking the equity benchmark index and proxy for market-ride investor confidence down sharply in early European trade. The setup hints that the safe haven demand may recover as Wall Street comes online, offering a life-line to the greenback against its sentiment-linked counterparts.

Looking at the economic calendar, minutes from October’s Bank of England policy meeting headline the docket. Bank Governor Mervyn King and company rebooted the quantitative easing program earlier this month, and the markets will be keen to learn the voting pattern on the rate-setting MPC committee that produced the unforeseen outcome with an eye on what can be expected down the road.

Related: Japanese Yen Unaffected By All-Industry Activity Index

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Leading Index (MoM)

0.8%

-

0.6% (R+)

0:00

AUD

DEWR Internet Skilled Vacancies MoM (SEP)

-1.3%

-

-0.6%

1:45

CNY

Actual FDI (YoY) (SEP)

7.9%

-

11.1%

2:00

CNY

Conference Board Leading Econ Index (AUG)

159.5

-

158.7

4:30

JPY

All Industry Activity Index (MoM) (AUG)

-0.5%

-0.4%

0.4%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:00

EUR

Euro-Zone Current Account n.s.a. (euros) (AUG)

-

-3.2B

Low

8:00

EUR

Euro-Zone Current Account s.a. (euros) (AUG)

-

-12.9B

Low

8:00

EUR

Italian Industrial Sales n.s.a. (YoY) (AUG)

-

7.7%

Low

8:00

EUR

Italian Industrial Orders s.a. (MoM) (AUG)

1.7%

1.8%

Low

8:00

EUR

Italian Industrial Orders n.s.a. (YoY) (AUG)

4.2%

6.5%

Low

8:00

EUR

Italian Industrial Sales s.a. (MoM) (AUG)

-

1.6%

Low

8:30

GBP

Bank of England Minutes

-

-

High

9:00

EUR

Euro-Zone Construction Output s.a. (MoM) (AUG)

-

1.4%

Low

9:00

EUR

Euro-Zone Constr Output w.d.a. (YoY) (AUG)

-

1.2%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3664

1.3906

GBPUSD

1.5622

1.5912

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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19 October 2011 07:48 GMT