The U.S. Dollar weakened against the majority of its peers as optimism reigned in the markets following the release of surprising U.S. Manufacturing figures. It rallied further on optimism over the Euro-zone?s chances of moving closer to stemming the debt crisis, especially after Spain announced new budget and banking measures. According to official data from the Institute for Supply Management, the Index of Manufacturing in the U.S. rose to 51.5 last month after having posted at 49.6 in August. The greenback remained low as the Federal Reserve Chairman, Ben Bernanke, indicated that the central bank is committed to implementing added stimulus even if the economy shows growth. The U.S. Dollar gained briefly following disappointing Manufacturing activity news out of China. Other reports confirmed that Construction Spending in the U.S. MoM in August dipped slightly. The Canadian Dollar rallied versus most of its counterparts after the U.S. reported the first advance in Manufacturing since May. The Loonie rose against its American counterpart as Statistics Canada revised previous economic data, indicating that the nation?s economy grew faster than previously reported. Furthermore, crude oil, its biggest export, climbed for a third day.
The Euro rebounded from three-week lows against the U.S. Dollar on bullish economic reports out of the U.S. and hope that the Euro region is close to stemming the debt crisis. However, market investors remained cautious as Moody?s Investors Service is reviewing Spain?s rating. The shared currency strengthened after Spain?s Finance Minister indicated that the country is studying a financial assistance proposal issued by the European Central Bank. The British Pound traded low against the U.S. monetary unit subsequent to the release of lackluster U.K. metrics, even as surprising U.S. economic data lifted market sentiment. The Sterling remained weak due to official figures which revealed that the Manufacturing Purchasing Manager?s Index dropped more than anticipated last month. The Bank of England stated that it issued fewer loans to individuals in August.
The Yen traded mixed against the U.S. Dollar on worries the E.U. isn?t managing Spain?s debt woes. Data confirming that China?s Manufacturing sector contracted for a second month thereby reignited concerns that global economies have slowed down. Early in the trading session, the Bank of Japan published the Tankan Survey, a leading indicator of the economy?s health; it showed a drop to -3 in the second quarter, after it read at -1 in the first three months of 2012. The Yen had gained after risk appetite dwindled away due to less than stellar data from China.
Lastly, the Australian Dollar slumped to a one-year low versus the New Zealand currency in anticipation of the Reserve Bank of Australia?s policy meeting scheduled for today. The Aussie dipped against the greenback on predictions the RBA will lower the interest rate by 25 basis points. And the Kiwi fell as a drop in global equities reduced demand for high risk assets. The decline of the South Pacific monetary units was limited as investors speculated that China?s government would increase stimulus given the recent contraction in manufacturing activities.
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EUR/USD- Appetite Rebounds On U.S. Manufacturing
The Euro rallied after a stress test of the Spanish banks revealed that they were in better shape than anticipated and would only need close to 60 bn Euros to recover. The shared currency extended gains as risk appetite took over market sentiment following the release of better than anticipated U.S. Manufacturing data, while Euro-zone figures indicated that Manufacturing PMI went from 46.0 to 46.1. Other metrics revealed that German Manufacturing PMI gained from 47.3 to 47.4, French Manufacturing posted at 42.7 after it read at 42.6 the month before; and the region?s Unemployment Rate remained at 11.4 percent.
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GBP/USD- Manufacturing PMI Drops
The British Pound fell at the start of the week after economic data confirmed that Manufacturing PMI in the U.K. dropped in September from 49.6 to 48.4. Other reports showed that Net Consumer Credit dipped by -0.1 billion when analysts forecast it would go up by 0.1 billion. Furthermore, Mortgage Approvals increased to 47.7K; and Net Secured Lending as well as Loans on Homes slipped to -0.3 bn indicating that financial institutions are still reluctant to lend to individuals.
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USD/JPY- BOJ Releases Tankan Survey
The Yen rebounded against the greenback following the release of positive economic data out of the U.S. In Japan, the Tankan Survey indicated that Manufacturers became more pessimistic following a recent decline in exports. According to the Bank of Japan?s Index, Large Manufacturers showed a drop of -3. Large Manufacturers outlook dipped -3 when a fall of -5 was predicted; and the Tankan Non-Manufacturing Index posted at 5 rather than the expected 6. Other releases indicated that the Tankan Big Industry Capex increased by 6.4 percent when economists forecast a dip from 6.2 to 5.0 percent; Corporate Loans and Discounts YoY went up after it fell the prior month.
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USD/CAD- Statistics Canada Revises Growth Data
The Canadian Dollar rallied against its U.S. counterpart following an announcement by Statistics Canada in which they revised the previously issued growth data. According to the latest release, Gross Domestic Product expanded at a 1.9 percent annualized rate in the second quarter of 2012 rather than the previously announced 1.8 percent. Other figures showed that Canada?s raw material costs increased more than anticipated in August while the products? prices went down. The Raw Materials Index gained 3.4 percent, exceeding all forecasts.
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Today?s Outlook
Today?s economic calendar reveals that Australia will release the RBA Rate Statement, the Interest Rate Decision, Trade Balance and HIA New Home Sales. The U.K. will report on Nationwide HPI and Construction PMI. The E.U. will announce Changes in Spanish Unemployment and PPI.
Source: http://traderbase.iforex.com/iforex-daily-october-2-2012/2331
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