Finotec News Archive - July 02 2008

Dollar trading at a three week low before the employment release

Tammy Wally
02 July 2008

Add to bookmark:

Print this article

Subscribe to RSS

The dollar traded near a three-week low against the euro before an industry report today that economists predict will show U.S. companies cut jobs in June for the first time in four months. The U.S. currency also traded near a three-week low versus the yen before government data tomorrow that may show employers in the world's biggest economy reduced staff numbers for a sixth straight month, prompting traders to pare bets the Federal Reserve will raise interest rates. ``Buying the dollar now seems to be the wrong move,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Weak numbers from the labor market are sure to push the dollar lower. You can't deny that there are sufficient reasons to worry that the U.S. economy will slow.'' The dollar is currently trading at $1.5826 per euro as of 7:46 am, GMT from $1.5793 yesterday.

The ECB will boost its benchmark rate a quarter-percentage point to 4.25 percent, according to 57 of 58 economists surveyed by Bloomberg News. ECB executive council member Lorenzo Bini Smaghi said yesterday the bank's inflation-fighting mandate means it acts faster than the U.S. Fed. President Jean-Claude Trichet said June 25 that the ECB is ``in a state of heightened alertness'' on prices. The ECB has kept its benchmark rate at 4 percent since June of last year. The Fed lowered rates seven times between September and April, to 2 percent from 5.25 percent.

Yen sales by Japanese individual investors on the Tokyo Financial Exchange reached the highest since August yesterday as they bet the currency will extend its worst quarterly loss against the U.S. dollar since December 2001. Members of the public including pensioners and businessmen accelerated purchases of foreign currencies as this week's gain in Japan's currency provided an opportunity to buy higher-yielding assets in Australia and New Zealand at cheaper levels. The highest yen sales in almost 11 months came as a Bank of Japan business confidence survey raised speculation the central bank will need to keep its benchmark interest rate at 0.5 percent this year. The USD/JPY is currently trading at 106.28 as of 8:09 am, GMT.

Finotec Analysis Team
02 July 2008

Print this article

Today's Economic Events

Time	Event	Currency	Period	Previous	Forecast	Significance	Actual
14:30	Crude Oil Inventories	USD		0.8M	-0.1M		-2.0M
The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly increase in barrels of commercial crude oil held in inventory by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation and other economic forces.
14:00	Factory Orders m/m	USD	May	1.1%	0.5%		0.6%
Measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods. Factory Orders tend to have a low impact because it reports much of the same information contained in the Durable Goods Orders report released over a week earlier.
12:15	ADP Nonfarm Employment Change	USD	Jun	25K	-20K		-79K
Measures the change in number of employed people during the previous month, excluding the farming industry.
09:00	PPI m/m	EUR	May	0.8%	0.9%		1.2%
The Producer Price Index (PPI) measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation's currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.
08:30	Construction PMI	GBP		43.9	43.1		38.8
The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager\'s Index (PMI) measures the activity level of purchasing managers in the construction sector, with a reading above 50 indicating expansion.
01:30	Building Approvals m/m	AUD		7.8%	-3.3%		-6.5%
Measures the number of new residential building permits issued.
01:30	Retail Sales m/m	AUD		-0.1%	0.1%		0.7%
Measures the value of sales at the retail level. A rising trend has a positive effect on the nation's currency because Retail Sales make up a large portion of consumer spending, which is a major driver of the economy and has a sizable impact on GDP. Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises.