Talking Points<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· Swiss data continues to impress
· German PMI boosts overall EZ PMI results
· <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK PMI slips on higher energy costs
· Markets look to US ISM Manufacturing
The euro rebounded off session lows that nearly reached the 1.2750 level after better than expected PMI Manufacturing caused a quick short covering rally back to the 1.2800 figure. EZ PMI Manufacturing printed at 57.0 higher than the 56.4 expectation - as the regions reading was boosted by the results of German PMI numbers which catapulted to a yearly high of 58.5. The data suggests that so far the higher euro is having minimal impact on the economic recovery of the Euro-zone as internal demand is offsetting any pressures on exports. The news led some traders to anticipate that the ECB may be emboldened to hike rates by 50 basis points rather than the expected 25 at its next meeting in June. If true, such a move should provided <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />further fuel for euro longs especially if the Fed hesitates and chooses to pause at its own June meeting later in the month.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
In the meantime, the focus today will shift to US ISM Manufacturing reading expected to slip slightly to 55.7 from prior months 57.3. Given the fact that yesterday Chicago PMI numbers beat forecasts by a whopping 5 points, the market is now primed for an upside surprise and a lack of one could pressure the dollar for the rest of US session. On the other hand, a stronger ISM reading may signal that the NFP report will come within expectation and that in turn should stifle any speculation of a Fed pause in June.
