The EURUSD enjoyed an uninterrupted rally through the 1.5600 figure in overnight trade, boosted by better than expected EZ FDP results and news that Lehman Brothers may be looking to raise capital once again to buttress its damaged balanced sheet.
Talking Points
• Japanese Yen: Takes out 104.00 figure on tumbling Nikkei
• Euro: Above 1.5600 as GDP surprises to the upside
• Pound: Mired below 1.9700 as PMI Construction lower
• US Dollar: Factory Orders on tap
The EURUSD enjoyed an uninterrupted rally through the 1.5600 figure in overnight trade, boosted by better than expected EZ FDP results and news that Lehman Brothers may be looking to raise capital once again to buttress its damaged balanced sheet. EZ GDP printed a bit stronger at 0.8% versus 0.7% in Q1 of 2008 as the 15 member region recorded an annual growth rate of 2.2% - more than double the 0.9% rate of US.
The news generated steady EURUSD buying throughout the early European morning trade, as it cemented the notion that ECB policy makers will continue to favor controlling price pressures for the foreseeable future as growth in the EZ remained adequate. Meanwhile those price pressures remained elevated as the latest EZ PPI numbers registered a 6.1% annual rate of increase – the highest level this decade driven by skyrocketing energy prices.
Given today’s robust GDP data, traders will expect no change in posture from ECB chief Jean Claude Trichet at his monthly news conference this Thursday. Mr. Trichet is likely to maintain his hawkish tone signaling that the ECB monetary policy will remain restrictive for the time being.
Euro also gained some strength as a safe haven bid after an overnight WSJ article that suggested Lehman Brothers will once again turn to capital markets for $4 Billion to shore up its fledging balance sheet. Currency traders are becoming increasingly concerned about the prospect of further fallout from the credit crisis in such finance driven economies as US a
nd UK. In UK overnight news confirmed that the slowdown in the housing sector continued as PMI Construction reading missed to the downside printing at 43.9 versus 45.8 expected. As a result the pound lagged the euro against the buck.
In North American session today, the calendar will be relatively light with only Factory Orders in the docket. Given the better than expected results from ISM Manufacturing, yesterday today’s report could surprise to the upside which in turn may provide the dollar with modicum of support for the rest of the day.
