Euro Rises After Stronger PPI Numbers (page 2 of 2)

Comments from ECB members today were as conflicting as ever with ECB Garganas saying that turmoil will ease after the publication of audited bank balance sheets and Noyer warning that the European economy may be more damaged by the US housing slump than initially forecast. Service sector PMI is due for release tomorrow. The problems in the financial sector could weigh on service sector growth.

British Pound: Next Central Bank to Surprise?

The British pound continued to range trade as economic data provided little guidance on whether the Bank of England will be the next central bank to lower interest rates this week. Like the Bank of Canada rate decision, going into the BoE rate decision, only 60 percent of traders expect the central bank to make a move. Although economic data is also weakening with retail sales and construction sector PMI falling last month, producer and consumer prices are on the rise. Therefore the BoE does not have as much flexibility as the BoC to lower interest rates. It's a tough call though because UK LIBOR rates are skyrocketing and the central bank may want to measures to offset that pressure by easing monetary policy. Service sector PMI due out tomorrow could help clarify what the central bank may do on Thursday.

Further Losses in the Dow Leave Carry Trades Mixed

The Japanese Yen crosses are mixed today as the Dow continued to give back some of last week's impressive gains. The only piece of Japanese economic data released last night was the monetary base, which was stronger than expected. There is no data scheduled for release tonight, but that does not mean there will not be any action in the carry trades. Australia and New Zealand's interest rate decision could shift demand for high yielders, which will have its impact on the Japanese Yen. Also, keep an eye on the Dow because the decline today stopped short of an important technical support level. If that level is broken, we could see sharp losses in US equities.