Personal Finance - Standard Chartered Bank Market Matters
Foreign Exchange Market Report
FX Snapshot 30 Aug 2004
 
Personal Finance - Standard Chartered Bank USD
Nonfarm payrolls to determine direction
  • The markets will focus on the ISM Manufacturing and Non-farm payrolls. The consensus for NFP is currently 150k. We expect something around 200k, but the employment components of the ISM survey could provide a clearer picture. A stronger than expected payroll should provide moderate and short-term support for the dollar.
    Personal Finance - Standard Chartered Bank EUR
    More sensitive to developments in the US than at home
  • The EUR will be more sensitive to data releases from the US rather than the Eurozone. Given our view on the payrolls number, the EUR could be under downward pressure in the short term. Due to the structural problems in the US economy however (Twin Deficits) we believe that the EUR will continue appreciating after the dust from payrolls settles.
    Personal Finance - Standard Chartered Bank JPY
    Keep an eye on oil prices
  • The JPY is sensitive to oil prices. We estimate that for a 10% increase in oil prices, USD/JPY appreciates by 6%. Our view is that at current levels the JPY is undervalued. A cool off and the eventual stabilisation in oil prices will allow the JPY to appreciate. Oil prices will be therefore key.
    Personal Finance - Standard Chartered Bank GBP
    Under pressure
  • A positive payroll number should add to the pressure the GBP is facing. With the market already pricing in higher interest rates in the UK, developments in the housing market need to be monitored. Any signs of a deceleration in house prices could worry the market, leaving the GBP vulnerable. We expect GBP to eventually stabilise at around 1.80 by the end of the quarter.
    Personal Finance - Standard Chartered Bank AUD
    Economy on track
  • GDP figures to be released this week should show that the economy is back on track, following the soft start to the year. Retail data should show another strong number for July, following the 2.1% increase in retail activity in June. These are likely to dampen the effect stronger than expected US data will have on the AUD.
    Personal Finance - Standard Chartered Bank SGD
    Riding on the JPY
  • The Purchasing Manager Index and Electronics Sector Index on Thursday are likely to be affected by the slowing in electronic demand. The correlation between JPY and SGD remains high, reflecting the fact the movement of the JPY will largely decide the direction of the SGD.

    Key Levels
    Currency Support Resistance
    EUR/USD 1.1945**** 1.1760**** 1.2210*** 1.2465****
    USD/JPY 107.50**** 105.00*** 112.50**** 115.00***
    GBP/USD 1.7720*** 1.7480**** 1.8350**** 1.8500***
    AUD/USD 0.6870**** 0.6775*** 0.7380**** 0.7520***
    USD/SGD 1.6945*** 1.6750** 1.7305**** 1.7520**

    Key: (*)-Minor; (*****)-Major

    Key Events
    Event Day Implication
    US: PCE Core Monday The inflation indicator that the Fed watches closest. This core number will remain subdued.
    US: Chicago PMI Tuesday Expect a slight dip this time, following weaker than expected regional PMIs already seen in August.
    US: ISM Manufacturing Wednesday Markets will be preoccupied with the employment component ahead of Friday’s non-farm payrolls
    Eurozone: Manufacturing PMI Wednesday Another modest rise in the index suggests that the Eurozone recovery continues to gather steam.
    US: Unit Labour Costs Thursday The second reading in this key inflation report should be little changed on the preliminary estimate of 1.9%
    Eurozone: ECB rate decision, Governor Trichet speaks Thursday Growth building gradually, inflation trending lower: little need for the ECB to alter interest rates now.
    Singapore: PMI, Electronics Sector Index Thursday Likely to be affected by the slowing in electronic demand
    UK: Services PMI Friday The wettest August on record suggets that people stayed indoors this month. Sales probably suffered and the services survey should fall.
    US: Change in Nonfarm payrolls Friday Early indications from weekly reports points to around 170k, which would be enough for the Fed to sanction a 25bp rate rise in September.

    Recent FX Performance (%, +ve = USD decline)
    Currency Past 1 Week 1 Month 3 Months 1 Year
    EUR/USD -2.45 0.00 -1.67 8.23
    USD/JPY -0.38 1.65 0.61 6.66
    GBP/USD -1.60 -1.59 -2.29 12.76
    AUD/USD -2.82 0.13 -1.53 8.61
    USD/SGD -0.25 0.40 -0.75 2.48

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