Dollar Stable In Quiet Holiday Trade

Talking Points

• Australian Dollar: Labor set to win
• Japanese Yen: Nikkei makes a mild bounce yen holds around 108.50
• Pound: Business investment surprisingly weak
• Euro: GDP in line but Industrial Orders slip
• US Dollar: Thanksgiving holiday

Dollar Stable In Quiet Holiday Trade

As expected holiday thinned markets produced very little meaningful price action. EURUSD spent most of the night consolidating in 1.4830 area, with the latest EZ economic data providing little help to the unit. Earlier in Asia the pair hit a new record high of 1.4874, but backed off that level when follow through proved elusive.

Trading is likely to turn even more moribund for the rest of the day as all US capital markets will be closed for Thanksgiving day holiday. Last year the markets saw very unexpected volatility during this time as EURUSD veritcalized more than 100 points, but this year traders appear content to simply let prices lie where they may. With so much dollar bearish sentiment built into the price of the EURUSD the currency markets are likely to consolidate for the rest of the week as they look for additional news to push to the 1.50 figure.

If anything, the EZ PMI manufacturing data slated for tomorrow may weigh on the euro and push the pair below the 1.4800 level as evidence of further deterioration in the region’s industrial sector is likely to mount. Tonight, the market saw a hint of the effect of higher EURUSD exchange rate on manufacturing demand as Industrial New Orders missed to the downside printing at -1.6% vs. 0.7% expected. Overall Industrial Orders were up on a year over year basis albeit only 2% vs. 6.5% forecast.

So far the economic news suggests that the impact of higher euro on EZ’s manufacturing output remains relatively benign. However, if tomorrow’s flash PMI data – which serves as the most recent snapshot of business conditions – slips below the 50 boom/bust line concern over the record high euro could suddenly increase. Today’s announcement that President Sarkozy is scheduled meet with ECB chief Jean Claude Trichet tomorrow in  Paris is a sign of discontent amongst some government officials with euro recent hyper strength that many fear will sabotage EZ’s  economic expansion.