FX.co ★ Fundamental review for October 25, 2013

PMI indices in the Eurozone in September surpassed the forecasts. PMI Manufacturing was 51.3 vs. 51.4. PMI Services was 50.9 vs. 52.3. US Trade Balance in August was better than expected, -$38.8 billion vs. -$39.4 billion. US PMI Manufacturing in October was 51.1 vs. 52.8. Data on US Initial Jobless Claims was 343K vs. expectations for 350K (data on the previous week was revised downwardly, from 358K to 362K); it was a hindrance for the US dollar to strengthen. The publication of the data on US New Home Sales was shifted to November 26. S&P 500 added 0.32%, the US dollar has no power to consolidate; the euro rose 25 points, the pound sterling added 34 points, the first reaction on weak data on CBI Industrial orders expectations in October in the UK was -4 vs. expectations for 10, as the result the British pound fell 40 points.

Today at 12:00 UTC+4 Ifo Business Climate Index in Germany in October is issued; forecast 108.2 vs. 107.7 in September. Probably, strong data on the index may be leveled by a new financial problem in the Eurozone. According to the ECB, liquidity (surplus of money supply in the banking sector) in the Eurozone dropped up to 187 billion euro. The Central bank has stated the threshold for 200 billion euro, below it additional means, i.e. LTRO, long-term refinancing operations, should be pushed into the system.

Today at 16:30 UTC+4 data on US Durable Goods Orders in September is issued; forecast 1.7% vs. 0.1% in August. Core index (excluding transportation) is expected to be 0.6% vs. -0.1% in August. At 17:55 UTC+4 US UoM Consumer Sentiment in October is revealed; forecast 75.8 vs. 75.2. We expect the second attempt of the US dollar to consolidate.

In the UK data on GDP in the third quarter in the first estimate is revealed. Usually we could expect the rise of the pound, however, amid the strengthening prerequisites for the reversal we may expect this news will be regarded in the price, as the figure was announced even on October 9, when NIESR published its forecast.

As a result the US data will determine the outlook. We expect the euro to decline to the low of October 23, 1.3740; the pound will drop to 1.6120 and the second target is 1.6040/55.