by Korman Tam
The dollar was little changed against the euro and sterling
despite a sharply weaker than expected August US durable
goods orders. The typically more volatile figure reversed
its previous month's gains, with the headline number
falling by 4.9% versus a 6.0% increase from July.
Meanwhile, the excluding transportations reading posted a
1.8% drop compared with a 3.8% gain in the previous month.
The disappointing data however, were overshadowed by a
strong opening in the US equity bourses after an agreement
was reached between GM and UAW to end the strike of auto
workers. Moreover, the yen weakened across the board amid
gains in global equities.
Traders will turn to several key reports due out in the
Thursday session, consisting of Q2 GDP, Q2 PCE, August new
home sales, weekly jobless claims and Q2 corporate profits.
The final GDP growth figure is seen softer at 3.9%, down
from 4.0% in the preliminary reading. The Fed's preferred
gauge of inflation, the PCE is unchanged from the previous
quarter – with the headline figure holding steady at 4.2%
and the core PCE reading at 1.3%. Weekly jobless claims are
seen creeping up slightly to 316k, from 311k last week.
Advertisement Sterling Mixed
The sterling traded sideways against the dollar, hovering
above the 2.01-level while edging higher versus the yen
toward the 233-mark. Data released overnight revealed
slightly stronger than expected economic growth from the UK
for the second quarter, with the annualized figure edging
out estimates for an unchanged reading at 3.0%, instead
growing at 3.1% and the quarterly reading steady at 0.8%.
The current account deficit was also smaller than
anticipated at 9.1 billion sterling, shrinking from 12.2
billion sterling in the first quarter.
In the session ahead, UK data will include September
nationwide house prices and CBI distributive trades. The
pound continues to be weighed by fears of a UK credit
crunch and its subsequent impact on the overall economy,
thereby raising expectations that the next rate move by the
Bank of England will be a cut.
Cable has retreated since testing the descending trendline
resistance at 2.03 earlier in the week and holds steady
above the 2.01-mark. We expect the pair to continue to
trade sideways and lag in performance relative to the euro
or Aussie against the dollar, as a result of tempered rate
hike expectations. Support begins at 2.0120, followed by
2.01 and 2.0070. Additional floors will emerge at 2.0040,
backed by 2 and 1.9970 and 1.9940. Gains will target
initial resistance at 2.0180, followed by 2.02 and 2.0230.
Subsequent ceilings are seen at 2.0275 and 2.03.
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