Currency news - Recession overshadows US election

Recession overshadows US election - 04-11-08

The Euro was unable to sustain the gains on Monday and weakened steadily with a decline to test lows below 1.2550 on Tuesday before a recovery. Although dollar Libor rates have continued to decline, dollar demand is still at elevated levels as global economic fears intensify. The US currency is also still in the paradoxical position of gaining support against the Euro on bad US economic news, especially with fears over another round of credit de-leveraging.

The Monday US data certainly reinforced fears over the economic trends. The national ISM manufacturing index dipped sharply again to 38.9 in October from 43.5 previously. This was the lowest reading since 1982 and is at a level which is consistent with a recession for the economy as a whole.

The data will increase fears over Friday’s payroll report, especially if there is a sharp deterioration for the services-sector index as well.

The US presidential election result will be watched closely with a particular focus on any suggestions over nominations for key Treasury officials. A decisive win for Obama and strong Democrat gains in Congress could weaken the dollar slightly on fears over medium-term budget policies.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

Full list of daily currency analysis

This analysis report is intended for distribution to ACM Advanced Currency Markets SA private, corporate customers and members. Information contained in this report is based on data obtained from sources considered to be reliable, however, no guarantees be made by ACM Advanced Currency Markets SA as to the accuracy, timeliness and completeness of the data. The opinions and forecasts contained herein are subject to change without notice and ACM Advanced Currency Markets SA accepts no liability for any losses, damages and/or expenses incurred arising from or in any way connected with the utilisation of all or part of this report. This report is meant for information purposes and is not intended to be and should not be construed as an offer or solicitation to buy, sell foreign exchange or indeed any other financial instruments. This report, or any part of it may not be reproduced or distributed without the prior consent of ACM Advanced Currency Markets SA.