Forex Daily Outlook – April 5th 2010
Most of the world is still enjoying the long Easter weekend, but there’s no holiday in the US and important data is due. Let’s see what’s on the menu:
The impact of Friday’s Non-Farm Payrolls will still be felt. After many days of dollar weakness, the Non-Farm Payrolls showed a nice gain in jobs, after many months of losses. This was corrective for the dollar.
There are two important American releases at the same time – ISM Non-Manufacturing PMI is expected to follow the same figure for the manufacturing sector and rise from 53 to 54 points.
On the other hand, Pending Home Sales will probably continue dropping – last time’s big fall of 7.6% is expected to be followed with a mild drop of 0.6% this time.
The third event is a special meeting of the Federal Reserve to discuss the discount rate. Bernanke already stunned the markets with the raise of this special rate, less important than the Federal Funds Rate. It then happened after the close of the New York session, but still caused lots of action.
This time, it happens during the New York session, at 15:30 GMT, but when Europeans and others are still on vacation. He might raise this rate again, and boost the dollar. Raising this discount rate indicates a closer raise of the FFR.
Near the end of the day, New Zealand’s NZIER Business Confidence will be released. This quarterly indicator usually rocks the kiwi. In New Zealand it will already be Tuesday. If you’re trading NZD/USD – watch out…
That’s it for today. Happy forex trading!
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Hi Yoyah, welcome back. Yeah, the discount rate…well they didn’t flag it or hint it to the market this time so who knows. Personally, I doubt it because I think Bernanke would be wary of the market reaction following a surprise raise in a thinnish market – but who knows? Also the Aussie odds are dropping with a rumour doing the rounds that RBA will leave unchanged. This is close though as Stevens [RBA Governor] is watching the housing market like a hawk, which as usual in Australia is flying – and if he leaves the rate unchanged [as pointed out by Terry Mcrann] he may risk entangling himself in upcoming election campaigns and other political silliness. 50/50 bet I’d say…and with the USD on the march, it offers considerable event risk to those overly bullish.
Thanks for your comment Matt. Yup, there are doubts about both moves. I believe that Bernanke will move the discount rate, and that Stevens will take a break this time, but it’s hard to tell…
Just a quick follow-up Yoyah;
One compelling argument to note is that would Stevens take the unusual step of going on national morning TV and discouraging housing bidders and warning of increasing rates and then not raise the rate by 25bp? I keep coming back to that. The good news [nfp, non-ISM and pending homesales] coming out of the US may swing the balance. The bad data out of Oz, namely retails sales and housing construction won’t last. Oz was virtually uneffected compared to other countries, and this data may well turn out to be a blip on the highway to recovery. Food for thought.