Fri 5th Nov: Dollar braces for record highs against the single currency, markets await payrolls

Dollar hovers near record lows aganist the single currency after comments by the ECB chief Trichet led to further sell off in the dollar despite the weekly jobless claims coming lower than expected at 332k.
Last evening the ECB maintained its benchmark rate but stated that inflation would stay "significantly above 2 percent" citing oil prices as the chief culprit. Further Mr. Trichet suggested that the downside risks to the economy had risen and that fast currency movements would hurt the economy.
But these comments were taken softly by the markets who took the Euro to its late session highs of $1.2897- a whisker short of its all time high at $1.2927.
Conflicting news regarding Yasser Arafat's medical condition also caused confusion which led to a rise in the single currency and a fall in the crude oil prices by $2 as traders reflected that Mr. Arafat's succesor might solve the region's problems.
The Pound which usually mimicks the single currency's movements could not do so yesterday as yet another soft housing data and BOE's decison to leave interest rate on hold weighed on the currency.
Further jawboning from the MoF in Japan helped the Japanese currency to stay near its 106 levels. But the critical event to watch out today is the October payroll numbers which is expected to come out at 160k-175k. A number above 200k is expected to lead a euro selling while a lower number could potentially fuel yet another dollar sell off.

Thu 4th Nov: Bush wins “election” war; dollar loses the battle

Kerry conceded defeat to Bush without any dramatic delays and greenback did the same against majors, despite market predictions of dollar gains on a Bush win.
Traders swiftly did a reality check and started focusing on fundamentals of US economy. Amidst a clutch of yet another mixed data from US, with factory orders showing a decline of 0.4% (against forecast of 0.5% rise) but service ISM rising to 59.8 (previous 56.7), dollar lost ground. The employment index of ISM rose to 55.8 (3rd monthly rise) giving mild hopes of a better payrolls data on Friday.
EUR/USD gained almost 1.5 cents as dollar’s inherent weakness came to the fore. Bolstering the Euro was the continuing expansion in Euro zone services PMI that rose to 53.5 (previous 53.3).
ECB’s decision today on interest rates is expected to remain unchanged but their statement will be dissected in the face of rapid rise of Euro and inflationary risks due to oil prices that may limit gains up to 1.2850 temporarily.
Sterling was the biggest gainer, notching up the 1.85 levels reinforced by UK’s service PMI at 56.3 (previous 54.7; forecast 54.5).
Oil prices surged more than $1 on Wednesday on Bush’s re-election as it could bolster U.S. fuel demand and accentuate unease over the security of Middle East oil shipments.

Wed 3rd Nov: Dollar battles the election blues; trading expected to be range bound

Dollar lost most of its late European and early US trading session gains as rumours of a possible Kerry win hit the market. The traders unanimously agree that whatever be the outcome of the elections a swift decision would be dollar positive in the very near term though most of the likely gians would soon disappear as the markets would then look towards the existing fundamental strength of the US economy yet again.
The dollar hit 1.2660 aganist the single curency which showed disappointing data releases from Germany whose retail sales for September slipped below expectations. The single currency could chart new highs in the current rally ; should there be any uncertainity in the results of the US elections.
A stronger than expected CBI numbers from UK ensured that Pound vanquished the 1.84 levels.
Further dollar selling also ensued across the Pacific with the Japanese currency on the brink of breaching the 106 levels despite Japan's finance minister stating that any further movement in the currency could meet with action from the government.
The US stocks showed a strong response to the early exit polls as the Dow Jones fell from +100 to -40 before closing the day at -19. The markets would today focus on the US elections and majors should remain within a tight range.

Tue 2nd Nov: Markets weary as the race intensifies

The dollar was seen edging higher, as markets preferred to cut short positions just ahead of the US elections. A strong data release from the US assisted the dollar in its progress against the major crosses.
An improvement in the personal income figures to 0.3%, and an increase in consumer spending to 0.6%, paved way for dollar to gain despite the cloud darkening regarding the US elections. A stronger show of consumer spending and increase in core PCE index, 1.5% showed that inflation remained stable, reiterating possible rate hikes in the FOMC meet on the 10th.
The euro slid as oil prices cooled off and good consumer spending figures. Traders will remain cautious ahead of the US elections and an unlikely rate hike decision from the European Central Bank. The single currency finds support at 1.2670, with resistances starting from 1.2770 levels.
The yen too retreated ahead of the elections and should find support at 107.20 with resistances at 105.75.
The sterling moved in tandem with the euro, lower to the 1.8320 levels. The currency outlook remains shaky as chances of an increase in rates remain bleak as data from the UK is still shrouded in uncertainty. Expect the markets to remain cautious as the US elections intensify, with the possibility of the dollar strengthening as traders unwind positions.

Mon 1st Nov: Dollar bears continue their run

Yet another weaker than expected US Q3 GDP growth and the weakening consumer sentiment (against the expected), inspired the dollar bears to continue their selling spree. The traders sent the Dollar Index to lower than 84.80 points as the poor economic data fueled the uncertainty prevailing ahead of the US presidential elections.
The release of improved business sentiment index from the Euro-zone, adding to the bull-run of Euro, helped the Currency to surge near 1.28 levels.
Meanwhile, the Japanese currency galloped higher to 105 levels as Japan’s central bank issued a definitive forecast indicating an end of the long run deflation in the country. A sustainable return to rising prices is viewed to be a significant watershed in a recovery that could mark Japan’s escape from the legacy of the 1980s’ bubble.
Given the uncertainty prevailing in the US, we expect the non-dollar currencies to re-test their higher levels, once again. The Wall Street displayed its taste for optimism again this week, rising hard and fast from new lows for the year.
Fall in oil prices was seen as reason for the correction, which sprang the indices amid short term oversold conditions. The Dow closed higher, up 23 points at 10,027 and the Nasdaq Composite Index closed a tad higher at 1,975.