EURUSD Hits 2 Week Lows

Better-than-expected US manufacturing data boosted broad sentiment and lifted the dollar across the board. The euro slumped for the third consecutive day, with EURUSD breaking below its 55 dma for the 1st time in nearly 4 weeks. Swiss franc led for the second straight day. Japanese data on capital spending is due to be released.

Markets breathed a sigh of relief as the ISM report on manufacturing didnt post a drastic fall like some of the regional indexes earlier in the month. The measure fell to 50.6 from 50.9 but it was better than the 48.5 expected. Initial jobless claims improved to 409K from 421K, in line with expectations.

Late in the session, the market began to buckle down for Friday's non-farm payrolls report.

The CHF gains came after the Swiss government announced a second stimulus package to offset the strong franc. The euro fell on talk of ECB rate cuts, the poor European PMIs and a report that Greece will miss its deficit target. Greece'ss budget chief also resigned.

At the moment, the market saying Eurozone problems are a bigger worry than a US slowdown. After hitting a seven-week high on Monday, EUR/USD has fallen more than three full cents. EUR/CHF has fallen six full handles.

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The White House released its latest growth estimates with GDP at 1.7% in 2011 and 2.6% in 2012; the US jobless rate averaging 9.1% in 2011 and 9.0% in 2012; and CPI +2.8% in 2011, 1.8% in 2012. The numbers are slightly optimistic on growth/inflation next year but that’s to be expected.

Asia-Pacific Preview

The lone indicator of note in the upcoming session is Japanese capital spending. It is expected to rise 1.1% in July after a 3.3% rise in June. We don’t expect to see any meaningful reaction to this report as flows and apprehension ahead of NFP dominate.