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FOREX: US Dollar to Extend Gains as Stock Market Selloff Continues

FOREX: US Dollar to Extend Gains as Stock Market Selloff Continues

2011-09-22 06:45:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • US Dollar Poised to Extend Gains as S&P 500 Futures Promise Risk Aversion
  • Euro to Stay Under Pressure as Debt Crisis Worries Linger, PMIs Fall Again
  • NZ Dollar Slumps as Weak GDP Figures Undercut Interest Rate Hike Outlook

The US Dollar continued to push higher in overnight trade, rising against all of its leading counterparts on the back of safe-haven demand as Asian bourses followed Wall Street lower after the Federal Reserve interest rate decision, where policymakers opted not to expand its balance sheet as we expected. Chinese Manufacturing PMI figures HSBC stoked the selloff, showing the factory sector in the world’s second-largest economy shrank for the third consecutive month. S&P 500 stock index futures are pointing aggressively ahead of the opening bell in Europe, hinting the benchmark unit has room to continue higher as risk aversion carriers over into the coming session.

The New Zealand Dollar led the way lower among greenback’s leading counterparts as disappointing economic data compounded downward pressure on the already risk-sensitive currency after Gross Domestic Product figures missed expectations, showing the economy added just 0.1 percent in the three months through June. The result amounted to the weakest reading in there quarters and weighed heavily on RBNZ rate hike expectations, with a Credit Suisse gauge tracking the priced-in policy outlook for the year ahead dropping 9bps to the lowest level in six months.

The preliminary set of Euro Zone Manufacturing PMI figures headline the economic calendar in European hours, with expectations pointing to continued slowdown across the region’s manufacturing and services sectors. While such outcomes are certainly not supportive for the Euro, the reality of broadly slowing growth in the currency bloc has been a foregone conclusion for some time now, meaning further signs of weakness ought not to prove materially market-moving by themselves. With that in mind, periphery CDS spreads are ticking higher, suggesting the EU debt crisis remains a major near-term headwind facing the single currency.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Gross Domestic Product (QoQ) (2Q)

0.1%

0.5%

0.9% (R+)

22:45

NZD

Gross Domestic Product (YoY) (2Q)

1.5%

1.7%

1.7% (R+)

2:30

CNY

HSBC China Flash Manufacturing PMI (SEP)

49.4

-

49.9

5:00

JPY

Supermarket Sales (YoY) (AUG)

-2.2%

-

2.1%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

France PMI Manufacturing (SEP P)

48.5

49.1

Low

7:00

EUR

France PMI Services (SEP P)

54.2

56.8

Low

7:30

EUR

Germany PMI Manufacturing (SEP A)

50.5

50.9

Medium

7:30

EUR

Germany PMI Services (SEP A)

50.5

51.1

Medium

8:00

EUR

Euro Zone PMI Services (SEP A)

51

51.5

Medium

8:00

EUR

Euro Zone PMI Composite (SEP A)

49.8

50.7

Medium

8:00

EUR

Euro Zone PMI Manufacturing (SEP A)

48.5

49

Medium

9:00

EUR

Euro-Zone Industrial New Orders (YoY) (JUL)

10.5%

11.1%

Medium

9:00

EUR

Euro-Zone Industrial New Orders (MoM) (JUL)

-1.2%

-0.9%

Low

9:00

CHF

ZEW Survey (Expectations) (SEP)

-

-71.4

Medium

10:00

GBP

CBI Trends Total Orders (SEP)

-5

1

Low

10:00

GBP

CBI Trends Selling Prices (SEP)

7

9

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3412

1.3725

GBPUSD

1.5318

1.5669

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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