AUD job ads highest in 4 months
EZ Services PMI slows
UK Manufacturing slows
US Calendar empty
A quiet start to the week in the currency market with most of the data having minimal impact on trade as the focus is likely to be on politics rather than economics. The pound was the biggest mover in early London trade as both Manufacturing and Industrial Production disappointed to the downside printing at 0.2% vs. 0.4% and 0.0% vs. 0.2% respectively. With the currency hovering near the 1.9000 level little wonder then that UK Industry is having a difficult time finding demand for its globally overpriced goods. The news however, should not alter the fact that BoE is likely to raise rates to 5.0% at the upcoming MPC meeting this Thursday as other UK data namely in the housing sector has been quite strong.
In the Eurozone, the PMI Services report printed slightly below expectations at 56.5 and lower than the month prior. The decline was due to a significant retrenchment in the future expectation component suggesting that EZ growth cycle may be peaking. Although the reading remains at lofty levels well above the 50 boom/bust level this is the fourth consecutive monthly decrease in the index which shows nascent signs of a slowdown in the 12 member region.
Economic data. however, is unlikely to be the key driver of trade at the beginning of this week as market players focus in tomorrows US elections. Conventional wisdom states that Democrats may win both the House and the Senate in which case the dollar is likely to weaken as FX markets generally dislike any change in the political climate. Yet if Republicans manage to retain the Senate and latest polling suggests momentum may be going their way the resulting gridlock in Washington would in fact be seen as dollar bullish. Furthermore, a full Republican win of Congress a long shot to be sure would be just the kind of surprise that could propel the dollar higher as continuity would be assured. In either case, order flows are likely to be muted as pairs meander back and forth until the 2006 election results begin to trickle in late tomorrow night.
