Tuesday December 7, 2004 - 11:14:19 GMT
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FOREX:US OPEN MARKET POINTS 12-07-04
Strong Yen Weak Japan
Japan appears to be on verge of tipping into a recession. After taking a brief respite from negative surprises by registering better than expected Capital Spending numbers last week, Japan resumed the depressing drumbeat of dour economic data by posting worse than anticipated results for Household Spending and Leading Economic Indicators. Household spending recorded a decline of –2.0% versus –0.5% expected as Japanese consumer demand contracted for 2nd month in a row while the index of Leading Economic Indicators dropped to only 20% from prior months 27.3% reading. This was the second month below the critical 50 expansion/contraction line and it bodes badly for the future growth possibilities of the Japanese economy.
Clearly, the strong yen is damaging the economic performance of the most export sensitive of the G-3 nations and Japanese authorities are becoming increasingly uncomfortable with the yen rally. Yesterday Vice Finance Minister Koichi Hosokawa said Japan, “will act aggressively on its rapid moves.” Yet up to now no intervention has taken place and yen bulls have been emboldened in their USD/JPY shorts. Even after tonight’s poor economic data the pair did not rally, but it did stabilize at 102.60 level comfortably above 100 – which many traders believe will trigger BOJ action.
In the Germany, the ZEW survey of investor confidence printed slightly above expectations breaking a 5 month string of declines. Spurred mainly by a drop in oil prices and hope that domestic demand may perk up as a result of the strong euro, ZEW survey reported 14.4 versus 10.0 expected. Yesterday’s surprising jump in Retail Sales confirmed that the recent gain in purchasing power may be finally stimulating European consumers to increase spending. However, EUR/USD reacted little to the news. With the currency already near record highs some dealers were selling into the rally to book profits.
FX Spot Overnight
- EUR holds steady at 3450 as ZEW offers no upward push
- JPY stabilizes at 102.60 with eco data quite weak
- GBP barrels through 9500 on option related stops and retraces to 9470
- CHF ranges 1340 - 1380
- 13:30GMT – (8:30 AM EST) USD Non-farm Productivity (3Q F) Expected 2.0%, Previous 1.9%
- 13:30GMT – (8:30 AM EST) USD Unit Labor Costs (3Q F) Expected 1.6%, Previous 1.6%
- 14:00GMT – (9:00 AM EST) CAD Bank of Canada Rate Decision Expected 2.50%, Previous 2.50%
- 20:00GMT – (3:00 PM EST) USD Consumer Credit (OCT) Expected 6.0B, Previous 9.8B
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