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FOREX: Dollar Slumps as Traders’ Focus Shifts Away from Egypt Crisis

FOREX: Dollar Slumps as Traders’ Focus Shifts Away from Egypt Crisis

2011-02-01 06:48:00
Ilya Spivak, Sr. Currency Strategist
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Key Overnight Developments

  • US Dollar Slumps as Traders’ Focus Shifts Away from Egypt Crisis
  • Australian Dollar Outperforms Despite Dovish RBA Policy Outlook

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3637

1.3778

GBPUSD

1.5901

1.6226

The Euro and the British Pound rose against the US Dollar – adding as much as 0.5 and 0.4 percent respectively - as the greenback came under broad-based selling pressure in overnight trade (see below). We are now short EURUSD.

Asia Session Highlights

CCY

GMT

EVENT

ACT

EXP

PREV

NZD

21:45

Average Hourly Earnings (QoQ) (4Q)

0.6%

0.6%

1.0%

NZD

21:45

Private Wages ex Overtime (QoQ) (4Q)

0.6%

0.5%

0.6%

NZD

21:45

Labor Cost Private Sector (QoQ) (4Q)

0.6%

0.6%

0.5%

AUD

22:30

AiG Performance of Manufacturing Index (JAN)

46.7

-

46.3

AUD

0:30

NAB Business Conditions (DEC)

6

-

4

AUD

0:30

NAB Business Confidence (DEC)

-3

-

6

AUD

0:30

House Price Index (QoQ) (4Q)

0.7%

-0.2%

-0.3% (R-)

AUD

0:30

House Price Index (YoY) (4Q)

5.8%

5.6%

10.8% (R-)

CNY

1:00

PMI Manufacturing (JAN)

52.9

53.5

53.9

JPY

1:30

Labor Cash Earnings (YoY) (DEC)

-0.4%

1.0%

0.2% (R+)

NZD

2:00

ANZ Commodity Price (JAN)

3.8%

-

2.0%

CNY

2:30

HSBC Manufacturing PMI (JAN)

54.5

-

54.4

AUD

3:30

Reserve Bank of Australia Rate Decision

4.75%

4.75%

4.75%

JPY

5:00

Vehicle Sales (YoY) (JAN)

-21.5%

-

-28.3%

AUD

5:30

RBA Commodity Price Index A$ (JAN)

100.0

-

95.3 (R+)

AUD

5:30

RBA Commodity Index SDR (YoY) (JAN)

48.7%

-

48.8% (R+)

The US Dollar tracked broadly lower in overnight trade, down 0.3 percent on average against its top counterparts, as investors focus shifted away from the crisis in Egypt and back toward an optimistic outlook on the global recovery, sapping safety-driven demand for the greenback. Asian shares rose for the first in three days, with the MSCI Asia Pacific regional benchmark equity index adding 0.3 percent, following an up day on Wall Street on the back of better-than-expected personal spending figures.

The Australian Dollar outperformed – adding 0.6 percent against its US namesake – despite a relatively dovish policy statement from the Reserve Bank of Australia, with the high-yielding currency seemingly capitalizing on the overall “risk-on” environment. In the statement accompanying the rate decision, RBA Governor Glenn Stevens said policymakers expect “inflation over the year ahead will continue to be consistent with the 2–3 per cent target,” adding that the current stance of monetary policy remains appropriate in view of the general macroeconomic outlook, thereby implying no further tightening in 2011.

Euro Session: What to Expect

CCY

GMT

EVENT

EXP

PREV

IMPACT

GBP

7:00

Nationwide House Prices s.a. (MoM) (JAN)

-0.4%

0.4%

Medium

GBP

7:00

Nationwide House Prices n.s.a. (YoY) (JAN)

-1.0%

0.4%

Medium

EUR

7:45

Producer Prices (MoM) (DEC)

0.6%

0.4%

Low

EUR

7:45

Producer Prices (YoY) (DEC)

5.0%

4.5%

Low

CHF

8:15

Retail Sales (Real) (YoY) (DEC)

-

1.8%

Low

CHF

8:30

SVME-Purchasing Managers Index (JAN)

59.2

59.6

Medium

EUR

8:45

Italian PMI Manufacturing (JAN)

54.8

54.7

Low

EUR

8:50

French PMI Manufacturing (JAN F)

54.3

54.3

Low

EUR

8:55

German Unemployment Change (JAN)

-10K

3K

Medium

EUR

8:55

German Unemployment Rate s.a. (JAN)

7.5%

7.5%

Medium

EUR

8:55

German PMI Manufacturing (JAN F)

60.2

60.2

Medium

EUR

9:00

Italian Unemployment Rate (SA) (DEC P)

8.7%

8.7%

Low

EUR

9:00

Euro-Zone PMI Manufacturing (JAN F)

56.9

56.9

Medium

GBP

9:30

Net Lending Sec. on Dwellings (DEC)

0.6B

0.8B

Low

GBP

9:30

Mortgage Approvals (DEC)

46.5K

48.0K

Medium

GBP

9:30

Net Consumer Credit (DEC)

0.0B

-0.1B

Low

GBP

9:30

M4 Money Supply (MoM) (DEC)

-

-0.8%

Low

GBP

9:30

M4 Money Supply (YoY) (DEC)

-

-1.4%

Low

GBP

9:30

M4 Excluding OFCs (3M ) (YoY) (DEC)

-

3.5%

Low

GBP

9:30

PMI Manufacturing (JAN)

58.0

58.3

Medium

EUR

10:00

Euro-Zone Unemployment Rate (DEC)

10.1%

10.1%

Medium

German Unemployment figures headline the economic calendar, with the economy expected to add 10,000 jobs in January to mark the largest increase since September, while the Unemployment Rate holds steady at an 18-year low of 7.5 percent for the fifth consecutive month. While this may offer a bit of short-term boost to the Euro, comparing the outcome with the region-wide Euro Zone Unemployment Rate – expected to remain at a record-high 10.1 percent – underscores the deep divergence in performance within the currency bloc that makes setting a unified monetary policy for all its members so difficult. Structurally, this amounts to a hurdle for the single currency considering that, recent rhetoric notwithstanding, the European Central Bank is hardly in a position to raise interest rates without snuffing recovery among the laggards of the 17-nation group even though Germany may warrant a less accommodative policy.

Elsewhere, UK Mortgage Approvals are set to decline to the lowest in 19 months in December while the Purchasing Manager Index (PMI) figures show growth in the manufacturing sector slowed for the first time since September. Meanwhile, House Prices are set to drop at the fastest pace since August 2009, sliding 1 percent from a year before in January. The outcomes may prove to weigh on the British Pound, hinting the economy is not nearly as ready for a rate hike as minutes from January’s MPC meeting suggested last week.

For real time news and analysis, please visit http://www.dailyfx.com/real_time_news

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

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