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At 10:00:00 AM US April Construction Spending (exp -0.1%, prev -0.9% ) US May ISM (exp 54.1, prev 53.9)
EUR/USD is trading around 93.30 off from its 15-month high of 94.16 cents after a Fridays' surprise surge in the Chicago PMI to 60.8 in May that overshot a forecasted reading of 54.9. The euro seemed unmoved after Eurozone producer prices rose 0.3% in April from the previous month and fell 0.7% from a year earlier. The markets forecast was on average a rise of 0.2% on monthly basis and fall of 0.9% year on year.Eurozone May PMI rose to 51.5 the highest since February 2001, after edging higher from the crucial 50-mark. The index was in line with markets predictions of 51.4 German May BME/ PMI rose to seas. adj. 49.8 from 49.1 German May PMI showed that output was rising at fastest rate since March 2001. May PMI showed that net orders rose for the second consecutive month due to a higher demand in key sectors. May PMI showed the fastest rise in costs since March 2001. The UK market is closed for the holiday and European trading is expected to be lighter. Markets await Thursday's ECB meeting where no rate cut is expected. The euro could gain further vs. the dollar as a result of US current account deficit which came at a record $417.4 bln in 2001, taking away more than $1 bln a day flows from the US. The latest forecast predict that the U.S. economy will expand at an annualized 3.1% this quarter, while the EU cut its growth estimates to 0.2% from 0.3% for the first quarter. Italy manufacturing PMI index rose to 51.8 in May from 51.5 in April, in line with markets expectations. Swiss National Banks' Governor Blattner reiterated that euro/Swiss at 1.50 would be desirable. EUR/USD support at the 93-cent figure, backed by 92.80 and 92.50. Resistance is seen at 93.25, 93.70 and 94.0.
USD/JPY seems supported around 124.15 as fear of Japanese govt. intervention continue to weigh on the market. MoF's Kuroda said that although there is no change in Japan's forex policy, he was carefully watching currency markets. He added that he heard no change in US forex policy. Japanese government announced that overtime pay declined for the 14th consecutive month down 3.4% y/y in April. Moreover, Japan total cash earnings posted its 12th straight month of fall in April down 1.6% y/y. The yen is likely to be underpinned by this week's release of Q1 GDP, which is forecasted to be upbeat by confirming the Japanese economy had bottomed. Japan May registered new vehicle sales fell 1.4% y/y at 284,826. It marked the 9th consecutive month of year on year declines. On Friday, Moody's cut by two-notch Japanese debt to Aa3 but the move was already priced in USD/JPY The BoJ Governor Hayami expressed his disappoval with Moody's decision. Support at 124 and 123.50. Resistance at 124. 50 and 125.20.
Today in the US, May ISM's factory index due at 10 am EST likely rose to 54.5 last month from 53.9 showing a slight increase after Friday's report showed that orders places in the US factories rose to the highest levels since October as the productivity grew in Q1 at the highest rate in almost 20 years. April construction spending is likely to rise 0.3% from March's 0.8%. It is likely that unusually mild weather was the reason why construction activity rose in Q1 at the expense of Q2.
Oil prices will fell again due to higher output and anemic world's growth that is hurting demand. To boost prices, OPEC reduced sales four times in a year, the latest taking effect on Jan. 1, and protected the support of non-cartel producers to limit supplies. That accord ends this month. Currently brent crude oil is trading around $23 a barrel down 6.7% from 2001. Russia's ending of its cooperation with OPEC will increase supplies and further undermine prices. Norway is likely to follow Russia and announced it plans to lift its sales restrictions at the end of June. Goldman Sachs Group Inc. is predicting the lowest price of $20 a barrel for the year.
This week's US economic highlights include the ISM Manufacturing index, ISM Non-Manufacturing index, jobless claims and the labor market report. Key Eurozone indicators consist of Manufacturing PMI, German PMI, French PMI, Italian PMI, Euroarea business and consumer sentiment survey, Euroarea unemployment, French INSEE household survey, Euroarea Services PMI, German Services PMI, French Services PMI, Italian Services PMI, Spanish industrial production, ECB rate announcement, German manufacturing orders, German employment, and Dutch CPI.