The euro advanced against the greenback for the second-day to reach at high of 1.4656, but failed to hold above the 20-Day SMA (1.4640) throughout the European trade, and the single-currency is likely to hold its current range ahead of the U.S. ISM non-manufacturing report due out at 14:00 GMT as investors weigh the outlook for future growth.
Talking Points
• Japanese Yen: USD/JPY Advance for Second Day
• Pound: Service-Based Activity Expands the Most Since September 2007
• Euro: Investor Confidence Hits 15-Month High in October
• US Dollar: ISM Non-Manufacturing Index on Tap
Euro Fails to Hold Above 20-Day SMA, British Pound Maintains Narrow Range
The euro advanced against the greenback for the second-day to reach at high of 1.4656, but failed to hold above the 20-Day SMA (1.4640) throughout the European trade, and the single-currency is likely to hold its current range ahead of the U.S. ISM non-manufacturing report due out at 14:00 GMT as investors weigh the outlook for future growth. Nevertheless, the economic docket showed service-based activity in the Euro-Zone increased for the first time since May 2008, with the PMI composite expanding for the second month, while investor confidence within the region rose to a 15-month in October.
The final services PMI reading for Germany tipped lower to 52.1 from an initial forecast of 52.2, while the gauge for the euro-region increased to 50.9 from 50.6, with the composite index rising to 51.1 from 50.8. Moreover, the Sentix investor confidence survey improved for the seventh month in October, with the index rising to -12.6 from -14.6, which is the highest reading since July 2008, while the gauge for future expectations increased to 5.75 from 5.50 in September. At the same time, retail spending fell 0.2% in August amid expectations for a 0.5% drop, with the annual rate of consumption slipping 2.6% from the previous year, which exceeded forecasts for a 2.4% decline. Nevertheless, ECB Governing Council member Ewald Nowotny said that the recovery will be “too slow” to stem the rise in unemployment, but went onto say that the economic outlook has “clearly improved,” and consumers may continue to scale back on spending over the coming months as policy makers anticipate households to face a weakening labor market going into the following year.
The British pound continued to hold a narrow range against the U.S. dollar and tipped lower for the third day to reach a low of 1.5920 during the overnight session, and the GBP/USD may retest the September low (1.5769) over the week as investors weigh the prospects for sustainable recovery. Meanwhile, the services PMI for the U.K. jumped to 55.3 from 54.1 in August, which is the highest since September 2007, and the data foreshadows an improved outlook for the region as policy makers take unprecedented steps to steer the economy out of recession.
The U.S. dollar continued to lose ground against most of its currency counterparts, but advanced against the Japanese yen for the second-day to reach a high of 89.99, and the greenback is likely to hold steady going into the North American trade as investors await the ISM Non-Manufacturing report due out at 14:00 GMT. Service-based activity in the U.S. is expected to expand for the first time September 2008 as economists forecast the ISM index to increase to 50.0 from 48.4 in August, and the data may stoke demands for the greenback as Fed Chairman Ben Bernanke sees the world’s largest economy emerging from the worst economic downturn since the Great Depression.
Will The EUR/USD Remain Above 1.4000? Join us in the Forurm
Related Articles:
EURUSD: Trading the U.S. Non-Farm Payroll Report
To discuss this report contact David Song, Currency Analyst: [email protected]
