11/5/2007 2:57 PM: EUR/$..1.4468 $/JPY..114.36 GBP/$..2.0803 $/CHF..1.1530 AUD/$..0.9196 $/CAD..0.9328
USD Supported by Data
The greenback recovered against the majors at the start of the week, benefiting from an upbeat report on the services sector. The dollar bounced off its lows versus the euro and sterling, from 1.4524 and 2.0896, respectively. This week??™s US economic calendar is light, with the releases of Q3 productivity, wholesale inventories, trade balance, and November University of Michigan consumer sentiment.
As such, market attention will shift to Fed Chairman Bernanke??™s Congressional testimony, scheduled for Thursday morning. Traders will scrutinize Bernanke??™s comments for any indication another 25-basis point rate cut can be anticipated in December. Further, great interest will be placed on the Fed Chairman??™s assessment on the state of credit conditions as well as materialization of additional subprime related losses on banks??™ balance sheets and its subsequent impact on the economy as a whole.
The October non-manufacturing ISM reading provided support for the greenback, as it unexpectedly improved to a 55.8 reading, defying calls for a decline to 54.0 from 54.8 in September. The employment index stood at 51.8, down from 52.7 while new orders came in at 55.7, up from 53.4 a month earlier.
Cable Drifts on Weak UK Data
Sterling backed away from its highest level in 26-years against the dollar on the heels of softer than expected economic data from the UK. The October services PMI fell short of consensus estimates at 53.1 versus calls for a smaller decline to 56.1 from 56.7 a month earlier. Industrial output unexpectedly dropped 0.4% m/m in September, down from a 0.1% increase from August, while also posting a 0.2% decline versus a 0.7% increase from a year earlier. Meanwhile, manufacturing output also disappointed, falling by 0.6% compared with a 0.4% increase from the previous month and down by 0.1% versus a 0.6% increase a year earlier.
The economic calendar from the UK is light this week, with the Bank of England announcing the results of its policy deliberation and the September trade deficit. The BoE is largely expected to leave policy unchanged at 5.75%. Also, as is customary, the BoE is not seen releasing a statement with the unchanged decision.
Cable retreated from beneath the 2.09-level to dip below 2.08. Support is seen at 2.0750, followed by 2.07 and 2.0670. Additional floors are eyed at 2.0640, backed by 2.06 and 2.0560. On the upside, resistance starts at 2.0830, followed by 2.0870 and 2.09. Subsequent ceilings will be eyed at psychological barriers at 2.0950 and 2.10.