The buck pared gains against the majors overnight as risk trades returned to the fold. US equities are still pointing to a negative open but are well off their lows. Meanwhile, credit measures continued to improve overnight and suggest the pipeline is slowly becoming unclogged. Whether this sentiment lasts remains the big question, but for now the flavor has been to sell the ''safe haven'' US dollar.
EUR/USD rallied a little more than 100 pips in London trading and was sitting near the 1.2945/50 zone. This was despite a poor batch of data out of the Euro-zone overnight. The PMI services index for October was revised down to 45.8 from 46.9 and the composite measure slipped to 43.6 from 44.6 as well. Retail sales were awful and shrank by -0.2% in the month of September, on the heels of a 0.3% increase prior. This took the annual rate to -1.6% from -1.5% previously.
Other currencies were also bid against the buck. GBP/USD jumped more than 170 pips towards 1.5980/90 despite very weak data out of the UK. The looming rate cut this Thursday and the increased speculation that the BOE will cut more than expected, however, should keep Cable under pressure. USD/CAD fell another -120 pips and was sitting just above 1.1514 after making a try for the 1.1480 zone. USD weakness kept oil elevated near the $69/bbl mark and this is helped to keep CAD bid here.
Upcoming Economic Data Releases (NY Session) Prior Estimate
11/5/2008 13:15 GMT US ADP Employment Change OCT -8K -100K
11/5/2008 15:00 GMT US ISM Non-Manf. Composite OCT 50.2 47.5
11/5/2008 15:35 GMT US DOE U.S. Crude Oil Inventories 31-Oct 493K - -
11/5/2008 15:35 GMT US DOE U.S. Gasoline Inventories 31-Oct -1507K - -