Posted by admin on June 4th, 2008 at 01:24am
Dollar higher as expected but should be finding a short term high
Releases from Europe:
Q1 Forecast Actual
Euro-zone GDP (P) (QoQ) +0.7% +0.8%
Euro-zone GDP (P) (YoY) +2.2% +2.2%
April
Euro-zone PPI (MoM) +0.8% +0.8%
Euro-zone PPI (YoY) +6.1% +6.1%
May
U.K. Construction PMI 45.8 43.9
European data provided nothing new to what we already know – inflationary pressures continue to rise and growth was sturdy in Q1 but we know conditions have deteriorated since.
The U.K. provides a different picture with the sharp shortfall against expectations in the construction PMI underlying the precarious situation in the housing market. It hasn’t paralleled the gloom of the U.S. but it’s certainly doing its best to try.
The front page news of Bradford & Bingley has brought that to a head this week with the beleaguered mortgage lender having seen its CEO resign after finding itself in arrears of 3 months on 5% of loans already purchased from Detroit-based GMAC. As a marker that is more than double the average rate for mortgages held by the Bingley.
Releases from the States:
Forecast Actual
April Factory Orders (MoM) - 0.1% +1.1%
U.S. data continues to provide easier reading with factory orders clearly benefitting and bringing the promise of better times to come.
Although Bernanke noted in his previous speech that the weakness of the Dollar was benefitting export companies he added balance last night by saying that the Fed is “attentive to the implications of the changes in the value of the dollar for inflation and inflation expectations.”
This came along with a more perky expectation of a better H2 saying that the fiscal stimulus will generate “somewhat better economic conditions” and that U.S. interest rates were “well positioned” for an economy facing both price pressures and threats to growth. He cited oil prices as a further factor weighing on growth.
However, he also cautioned that until the U.S. housing market and home prices stabilize, the economy would continue to face the risk of further weakness.
His comments provoked a burst of Dollar buying with the market interpreting that Bernanke was hinting that the Fed’s round of rates cuts had come to an end. Probably so but any thought of an imminent rate hike is premature since the Fed will want to see greater evidence of re-emerging growth before threatening consumer confidence while inflation remains a primary concern.
However, while the market had its brief excitement the question of the Dollar remains one of uncertainty still. Today’s releases are mostly final European services PMI numbers that should confirm the preliminary releases, Euro-zone retail sales and U.S. non-manufacturing ISM which is expected to show signs of weakness.
The fate of the Dollar still hangs in the balance but does still appear to be within a large consolidation following the 1.5283 low in the Euro. Tomorrow’s ECB rate decision will keep market players wary of extending any positions overnight and should therefore indicate another day of range trading but should see the Dollar weaker by the end of the day.
The Pound probably remains the most vulnerable with increasing downward pressure threatening to take it back to the 1.9335-63 lows.
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
Q1 GDP (QoQ) +0.3%
Q1 GDP (YoY) +2.8%
May AiG Performance of Service Index
Japan
Q1 Capital Spending (QoQ) - 9.8%
Q1 Capital Spending ex software (QoQ) - 7.6%
U.K.
May Nationwide Consumer Confidence 67.0
Under Daily Forex Analyses
