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FOREX: Spotlight Turns on US ISM Data as Fed Easing Hopes Linger

FOREX: Spotlight Turns on US ISM Data as Fed Easing Hopes Linger

2011-09-01 05:58:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Focus Turns to US ISM Data as Fed Easing Hopes Continue to Linger
  • European Economic Data to Paint Bleak Picture of Regional Growth
  • NZ Dollar Sold as Commodity Export Prices Drop For Third Month

An overload of economic data is set to cross the wires in European hours, but its market-moving potential seems limited barring wild deviations from consensus forecasts considering the bottom line is a familiar one: the global economy is slowing. Scanning the docket, the final revision of second-quarter German GDP data is set to confirm that growth slowed to the weakest annual pace in over a year; Manufacturing PMI readings across major European economies are all set to print weaker, with the factory sector shrinking in Italy, France and the UK while their counterpart in Germany grows at the slowest rate in close to two years. While certainly not good news, it is also not earth-shatteringly surprising. Indeed, regional data has been deteriorating dramatically for several months.

With this in mind, the headline event will be the US ISM Manufacturing gauge set to cross the wires in the second half of the session as speculation about another round of Federal Reserve stimulus continues to define price action across financial markets. Expectations call for the reading to show the US manufacturing sector contracted for the first time in over two years. If yesterday’s trading dynamics – wherein the US Dollar gains as better-than-expected economic data dims the possibility for further action from Ben Bernanke and company – continue to hold, then a disappointing reading ought to have the opposite effect.

However, the markets are likely primed for a weak reading after the dismal outcomes recorded on most regional Fed surveys over recent weeks, meaning a particularly disappointing result would likely be needed to materially weigh on the greenback. Having said that, trading volumes have withered dramatically since the beginning of August, so an erratic response in thin conditions is not out of the question.

The New Zealand Dollar underperformed in overnight trade, dropping as much as 0.6 percent against its leading counterparts after ANZ Bank reported that the price for the island nation’s commodity exports on global markets dropped 1.2 percent in August, marking the third consecutive drop and hitting the lowest level in 6 months. Exports account for close to 30 percent of New Zealand’s economic growth and weakness on this front bodes ill for the RBNZ interest rate hike outlook.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Terms of Trade Index (QoQ) (2Q)

2.3%

-

-0.4% (R+)

23:30

AUD

AiG Performance of Manufacturing Index (AUG)

43.3

-

43.4

1:00

NZD

ANZ Commodity Price (AUG)

-1.2%

-

-0.2% (R-)

1:00

CNY

PMI Manufacturing (AUG)

50.9

51.0

50.7

1:30

AUD

Private Capital Expenditure (2Q)

4.9%

4.0%

7.7% (R+)

1:30

AUD

Retail Sales s.a. (MoM) (JUL)

0.5%

0.3%

-0.1%

2:30

CNY

HSBC Manufacturing PMI (AUG)

49.9

-

49.3

5:00

JPY

Vehicle Sales (YoY) (AUG)

-25.5%

-

-27.6%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:30

EUR

French ILO Mainland Unemployment Rate (2Q)

9.2%

9.2%

Low

5:30

EUR

French Mainland Unemployment Change (2Q)

-

-7K

Low

5:30

EUR

French ILO Unemployment Rate (2Q)

9.7%

9.7%

Low

5:45

CHF

GDP (QoQ) (2Q)

0.4%

0.6%

High

5:45

CHF

GDP (YoY) (2Q)

2.3%

2.5%

Medium

6:00

EUR

German GDP n.s.a. (YoY) (2Q F)

2.8%

2.8%

Medium

6:00

EUR

German GDP s.a. (QoQ) (2Q F)

0.1%

0.1%

Low

6:00

EUR

German GDP w.d.a. (YoY) (2Q F)

2.7%

2.7%

Medium

6:00

EUR

German Domestic Demand (2Q)

-

1.1%

Low

6:00

EUR

German Private Consumption (2Q)

-0.2%

0.4%

Low

6:00

EUR

German Capital Investment (2Q)

0.8%

5.0%

Low

6:00

EUR

German Government Spending (2Q)

-0.1%

1.3%

Low

6:00

EUR

German Construction Investment (2Q)

-1.4%

6.2%

Low

6:00

EUR

German Imports (2Q)

2.3%

1.5%

Low

6:00

EUR

German Exports (2Q)

1.6%

2.3%

Low

6:00

GBP

Nationwide House Prices SA (MoM) (AUG)

0.0%

0.2%

Low

6:00

GBP

Nationwide House Prices NSA (YoY) (AUG)

0.4%

-0.4%

Medium

6:30

AUD

RBA Commodity Price Index (AUG)

-

108.3

Low

6:30

AUD

RBA Commodity Index SDR (YoY) (AUG)

-

27.6%

Low

7:15

CHF

Retail Sales (Real) (YoY) (JUL)

-

7.4%

Medium

7:30

CHF

SVME-Purchasing Managers Index (AUG)

51

53.5

Medium

7:45

EUR

Italian PMI Manufacturing (AUG)

49

50.1

Low

7:50

EUR

French PMI Manufacturing (AUG F)

49.3

49.3

Low

7:55

EUR

German PMI Manufacturing (AUG F)

52

52

Medium

8:00

EUR

Italian Hourly Wages (MoM) (JUL)

-

0.1%

Low

8:00

EUR

Italian Hourly Wages (YoY) (JUL)

1.8%

1.8%

Low

8:00

EUR

Euro-Zone PMI Manufacturing (AUG F)

49.7

49.7

Medium

8:30

GBP

PMI Manufacturing (AUG)

49.0

49.1

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4179

1.4439

GBPUSD

1.6169

1.6312

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