Daily Foreign Exchange Market Summary 11/02/2009

USD - America's currency was once again a victim to the tug-of-war action stemming from market uncertainty, as a mixed bag of economic data left traders frantically searching for clear direction. Markets opened last week with a sense of foreboding, as the closely watched Consumer Confidence Index dropped precipitously m/m (47.7 in Oct. vs. 53.4 prior). Moreover, New Home Sales fell shy of expectations (402K in Sep. vs. 440K exp.), as did Initial Jobless Claims (530K for 10/24 vs. 525K exp.). Market sentiment quickly did an about-face, however, as a string of sanguine data followed in rapid succession: Durable Goods (1.0% in Sep. vs. -2.6% prior); Chicago PMI (54.2 in Oct. vs. 46.1 prior); Univ. MI Confidence (70.6 in Oct. vs. 69.4 prior). The pinnacle of positive market sentiment for the world's largest economy last week was the robust Q3'09 GDP release (3.5% vs. -0.7% prior). The datum marked the first break from more than a year's worth of economic declines, and the first concrete sign of emergence from the miry depths of the worst recession since "The Great Depression". Markets have more reason to cheer this morning as the ISM Manufacturing data showed a stalwart ascent (55.7 in Oct. vs. 52.6 prior), while Pending Home Sales surpassed market forecasts (6.1% in Sep. vs. 0.0% exp.). Furthermore, the DJIA is back in positive territory again this morning (9,821 vs. 9.712.73 close Friday), which is helping to fuel the "USD carry trade", once again putting pressure on the greenback as risk sentiment improves. A substantial week of economic event risk promises no shortage of excitement in the days ahead. In particular, all eyes will be focused on Wednesday's FOMC Rate Decision, as well as Friday's NFP employment report. EUR - The euro rose to the upper end of recent ranges vs. the dollar as the pace of its rapid gains eased amid investor caution. The single currency rose to $1.4845 overnight as investor concerns over the global economic recovery kept the euro largely range-bound last week between the mid $1.46-$1.48 levels. The Eurozone showed signs of continuing recovery, albeit at a measured pace, as Consumer and Industrial Sentiment, while reporting improvement, remained negative at -18 and -21, respectively, in October. This sentiment was corroborated by E-16 unemployment which remained unchanged at 9.7% in September, and today's PMI, which at 50.7 in October, crossed modestly into the 50 territory separating growth from contraction. Given this, euro gains are likely to remain like the Region's recovery-gradual.