Wednesday, September 5, 2007


The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3550 level and was capped around the $1.3625 level. Technically, today’s intraday low was just below the 50% retracement of the move from $1.3260 to $1.3850. Traders are readying for this Friday’s August non-farm payrolls data in the U.S. with most forecasts focusing on job growth around 110,000 workers. A weaker-than-expected non-farm payrolls number will add to the view that the recent global credit slump and job losses in the U.S. mortgage industry are impacting the overall economy more-than-expected. The most likely scenario remains a 50bps reduction in the federal funds target rate by the Federal Open Market Committee on 18 September. Data released in the U.S. today saw the August ISM manufacturing index decline to 52.9 from 53.8 in July while July construction spending was off 0.4%. The Fed’s Beige Book is scheduled for release tomorrow and could evidence additional concern from policymakers about the state of the U.S. economy. In eurozone news, many traders believe the European Central Bank will keep its main refinancing rate unchanged this week on account of global credit conditions while others believe the ECB will remain on track and lift the refinancing rate by +25bps. Data released in the eurozone today saw EMU-13 GDP expand 0.3% q/q in Q2 and 2.5% y/y, unchanged from provisional estimates. Also, the European Commission kept its growth forecasts unchanged and still estimates Q3 GDP growth between 0.3% and 0.8% and Q4 GDP growth between 0.2% and 0.8%. Other data released today saw the July producer price inflation up 0.3% m/m and 1.8% y/y. Euro bids are cited around the US$ 1.3530 level.

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