Forex Daily outlook: EUR/USD rises to fresh highs

on Jun 5, 2013


EUR/USD hit 1.3108 during late Asian trade, the pair’s high point since May 9.
Tuesday’s news increased demand for the greenback.
Yesterday, the US deficit was updated to $40.29 billion slightly bettering expectations of -$41 billion.
The Redbook Index of US general merchandise retailers showed a consistent pace of growth at 0.6 percent in May m/m, the same reading as April and rose by 2.9 percent y/y compared to 2.7 percent in April’s reading. ISM’s New York Index, an estimate of business conditions amongst manufacturers and non-manufacturing enterprises in the New York region, showed a decrease to 54.4 in May down from 58.3 in April.

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Traders are now focusing on a press conference later today where Japanese Prime Minister Shinzo Abe will announce his further plans for growth in the world’s third-largest economy. He is also expected to propose new tax cuts.
Wednesday will bring plenty of European data, starting with the Eurozone Markit Services PMI for May at 09:00 BST and Q1 GDP at 10:00 BST. The Eurozone retail sales data in April y/y and m/m is also coming out at 10:00 BST.

Markets are focused on the US private sector jobs report by payroll processor ADP later Wednesday for clues on Friday’s key nonfarm payrolls data.
Ahead of Prime Minister Abe speech during the Asian session the pair hit 100.46, before retracing to lows at 99.58.
Yesterday’s strength of the yen was supported by a Reuters report, announcing that the Japanese government may direct public pension funds, which control the dollar-equivalent of $2 trillion in assets, to increase investment in equities and overseas assets.

The main target for Abe and the Bank of Japan is to get inflation to two percent within two years, a target generally considered as over ambitious.
During the Asian session today, Japan’s Nikkei 225 fell 0.15%.
In a speech given yesterday, Federal Reserve Bank of Kansas City President Esther George said she supports easing asset purchases due to the improving U.S. economy. It seems like the Fed is not going to reduce the QE program in the near future, but officials have continued to make comments giving occasion for speculation.

After yesterday’s US releases of figures on the trade deficit, the Redbook Index and the ISM New York Index, sterling pushed lower and the pair hit lows at 1.5274.
Early in Asian trade the pair has started an upside correction, trading at 1.5337 ahead of European bell.
The British pound remains strongly supported by the latest UK data.
Markit Economics reported the UK Construction Purchasing Managers’ Index rose to 50.8 in May from 49.4 in April, climbing above the 50 level that separates growth from contraction for the first time in six months. The positive data came in time to fuel some optimism for the potential for further improvement in the British economy, with the fastest growth in more than a year reported for the manufacturing sector in May. On the other side of the Atlantic, this Monday data updates showed that the U.S. manufacturing sector contracted for the first time in six months during May.
However, yesterday’s data gave some strength to the greenback with the U.S. trade deficit rising above expectations, by 8.5 percent to $40.3 billion in April. The Commerce Department said U.S. imports rose 2.4 percent in April to $227.7 billion, while exports increased 1.2 percent to $187.4 billion.
Following the release of Australia’s Q1 GDP report, AUD/USD fell to 0.9615 during the Asian session today. According to a report from the Australian Bureau of Statistics, data showed GDP grew by 0.6 percent in the first quarter of this year against the last quarter of 2012 and 2.5 percent y/y. Economists had expected a 0.8 percent increase.
The GDP update today comes a day after the Reserve Bank of Australia kept interest rates unchanged at 2.75. In a statement out Tuesday, the central bank added that it still has room to cut interest rates further and that the Aussie remains high despite its recent downside trend.
Traders are hoping that cuts will come sooner, as analysts had expected the current account deficit to narrow to AUD9 billion in the last quarter, but official data showed that it improved to AUD8.5 billion from a deficit of AUD14.8 billion in the previous quarter.
Yesterday’s speech by Federal Reserve Bank of Kansas City President Esther George has also been influencing the market and the AUD/USD movement.
The pair hit highs at 0.9792 overnight in the Asian session, but ahead of the European opening it was trading lower below the 0.95 barrier.
The greenback weakened against the Swiss Franc on Monday, following the announcement of weak US manufacturing data. The quote fell to 0.9409 on this news.
Since then the pair has been trying to make a correction, but lacks strong support. However, the USD was trading higher yesterday with a 0.9454 daily low. It has crossed the 0.95 barrier a few times, but without holding there for long.
In Wednesday’s Asian trade the pair hit its high at 0.9520, before retracing back to 0.9464 ahead of the European session.
The Eurozone data set coming at 9:00 BST will give a hint for further development, but US economic updates this afternoon will have the last word.
With US releases this Monday, the pair took a long downside rally from 1.0368 to 1.0265. Since then, the movement has been correcting slowly, lacking security.
The quote rose to 1.0360 yesterday, after official data showed that both the U.S. and Canadian trade deficits widened in April.
On Tuesday, Statistics Canada said the trade deficit widened to CAD0.6 billion in April, below expectations for a deficit of CAD1.0 billion. Imports rose to a record high of CAD40.8 billion, 1.2 percent higher than in March, while exports edged down 0.2 percent to CAD40.3 billion.
Elsewhere, the U.S. trade deficit widened by 8.5 percent in April to USD40.3 billion from USD37.8 billion in March, but came in below estimates for a deficit of USD41 billion.
The Commerce Department said U.S. imports rose 2.4 percent in April to USD227.7 billion, while exports increased 1.2 percent to USD187.4 billion.
Ahead of the European session today, the loonie was trading at 1.0365, before retracing to 1.0329.


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