Intraday Market Thoughts

GBP Pressured by PMI, Latest Premium Trades

by Patrik Urban
Oct 4, 2011 12:13

UK Construction PMI dropped; Eurozone PPI declined. China is opposed to US Currency Bill; Japanese firms see USDJPY above 80 during the fiscal year 2011. Market will focus on speeches by J. C. Trichet and Ben Bernanke, followed by Factory Orders. LATEST PREMIUM TRADES are up, see link below.

GBPUSD continues to trade heavy after UK Construction PMI declined to 50.1 in September from 52.6 in August. Construction PMI has been declining for five months in a row and today's print is the worst since 12/2010. Today's disappointing result negates yesterday's better than expected manufacturing PMI that could be used as an argument against the possible increase in the Asset Purchase Facility.

August Eurozone PPI printed 5.9% from previous 6.1% on annual basis. Monthly PPI contracted by 0.1% from +0.5% in July. Analysts expected -0.2%.

Despite persisting JPY strength, major Japanese automakers expect the USDJPY rate to average 80.51 during the fiscal year 2011 MNI reported. Major electronics firms project 81.19 and other businesses predict 79.82. However, all three categories have lowered their previous estimate to some degree.

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China has warned the US that it is "adamantly opposed" to the so called "Currency bill" that the US senate can begin considering after yesterday's 79 to 19 vote. This bill that could limit Chinese imports by imposing tariffs would be a measure against the artificially weak Chinese currency that contributes to widening trade deficit. Chinese officials said that the passage of the bill could lead to a trade war and that Beijing will continue to gradually strengthen the flexibility of the CNY exchange rate.

Market volatility could increase when ECB president J. C. Trichet testifies at 9:00 am ET before the European Parliament's Economic Committee. At the same time,

FED governor and FOMC member Sarah Bloom Raskin delivers a speech in Maryland. Audience questions are expected.

The New York session will also bring August Factory orders at 10:00 am ET that are seen unchanged from +2.4% print in July. Traders are likely to focus on FED chairman Ben Bernanke who at the same time testifies before the Joint Economic Committee in Washington DC.


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