[Jason_Lim]

German August manufacturing orders rose 1.4% m/m, in line with the median. July numbers were revised slightly down to 3.1% m/m from 3.5% m/m, but this still leaves orders up 5.8% in the less volatile two month comparision. The denial from the majority of the alleged co-conspirators in yesterday’s Independent’s oil redenomination story did little to support USD, and EUR has maintained most of its gains. The pair is a little softer this morning, dipping below 1.4700 possibly due to fears that a Latvian devaluation might have contagion effects into Eastern Europe. However in contrast to previous Baltic scares, this one has been well-flagged and efforts are being made to ring fence the problems, so the threat to EUR should be seen as limited. Continued intervention in FX markets by Asian central banks – the Bank of Korea intervened to slow KRW appreciation this
morning – should support EUR against the USD, and given the backdrop of a strong USD weakening trend, we remain bullish. However intra-day positioning seems to be a little long and may invite a clear-out to the downside; we view any move below 1.4650 as an opportunity to go long