Australian data dominated attention overnight as TD Securities Inflation eased for the first time in almost a year, meaning RBA policymakers could have room for a rate cut sooner rather than later. Data releases scheduled for European hours are set to further highlight the deteriorating health of the Euzo-Zone economy. On balance, traders may see the markets confined to shallow ranges until late into European trading as all eyes focus on the forthcoming employment figures out of the US.
[B][U]Key Overnight Developments[/U]
• Australian Inflation Prints Lower, Opening Door to RBA Cut
• Euro Slips Below 1.56 Ahead of US Jobs Data[/B]
[U][B]Critical Levels[/B][/U]
The Euro slipped below 1.56 in overnight trading ahead of July’s US jobs report. DailyFX Technical Currency Strategist Jamie Saettele reports the bias has shifted to favor the downside, though a though a corrective move higher is likely. Near-term support remains at 1.5569 with resistance at 1.5768. Sterling oscillated in a wide 40-pip range above the 1.98 mark. Support remains in the 1.9550-1.96 area, with near-term resistance at 1.9770.
[U][B]Asia Session Highlights[/B][/U]
Australian data dominated attention overnight as [B]TD Securities Inflation[/B] eased for the first time in almost a year, printing at 4.6% in the year to July versus 4.8% in June. The release suggests that record-high interest rates are starting to have the desired disinflationary effect, meaning RBA policymakers could have room for a rate cut sooner rather than later. The release is the first in a potentially long line of data to begin reflecting July’s collapse in crude prices. The need refocus policy on supporting economic growth was in sharp relief yesterday as Retail Sales printed at a six-year low of -1.0%.
[B]AiG’s Performance of Manufacturing Index[/B] sank marginally lower in July, printing at 46.9 versus 47.0 in the preceding month. The released passed with little fanfare.
[U][B]Euro Session: What to Expect[/B][/U]
Data releases scheduled for European hours are set to further highlight the deteriorating health of the Euzo-Zone economy. [B]German Retail Sales[/B] are expected to contact, printing at -0.8% in the year to June versus 0.7% in the preceding month. HDE, a Berlin-based retailers group, forecast that retail sales would drop by “about 1%” in 2008 as rising living costs (food, energy) eat away at purchasing power. Traders are unlikely to react strongly unless the release issues an upside surprise: the impact of inflation on consumption trends is likely to have already been priced into the exchange rate, with markets now anxious to gauge the impact of July’s crude selloff on the price level. Some lag can be expected as the effects of cheaper energy trickle into the broad economy, meaning traders will pay far more attention to the next Retail Sales due in August.
Australia’s [B]RBA Commodity Index[/B] could see the prices of Australia’s primary goods exports may decline. Coal, the single largest component of the index, fell nearly 25% in July.
On balance, traders may see the markets confined to shallow ranges until late into European trading as all eyes focus on the forthcoming employment figures out of the US.
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