Tuesday December 21, 2004 - 11:03:10 GMT
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FOREX: US OPEN MARKET POINTS 12-21-04
Caught in the cross currents of divergent economic data, the euro dipped slightly at the beginning of the European session only to rally back to the highs of the day as European Trade Balance report indicated that the regions very important export sector may have regained its momentum in November. The Trade Balance report registered a surplus of €5500M – larger than the expectations of €4700M and a strong recovery from September’s yearly lows of €2500M. The euro was also aided by very strong French consumer spending data which printed 1.5% versus 0.1% expected and a rebound in German October construction spending of 1.4%. However, an unexpected drop in Italian consumer confidence to yearly lows of 103.5 caused the unit to decline all the way to 1.3355 during the early European market hours.
Meanwhile, speaking at a press conference in Munich IFO President Hans Werner-Sinn stated that the real economy must react to the fluctuations in the currency market and noted forcefully, “Central Banks should intervene. The time has come.” Unless the pair reaches the 1.40 barrier soon after the New Year, we doubt that ECB will act. Although the unit’s rise has certainly caused some hardship for the region’s exporters, it has also had several positive effects on the EU economy, most notably from ECB’s point of view, a moderating influence on inflation. Additionally, the high euro forces European businesses to become more productive, while at the same time makes global business assets, especially those located in the United States much cheaper to acquire. As evidenced by today’s better than expected EU Trade data, European enterprises are adapting to the new FX regime and unless the markets continue much higher, the ECB will likely stay put.
FX Spot Overnight
- EUR back above 3400 as Trade Balance surplus rises
- JPY nothing doing at 104.20
- GBP fades to 9350 as RICS data sinks in.
- CHF breaks 1500 again though Trade Balance shows weakness
- 13:30GMT – (8:30 AM EST) CAD Retail Sales m/m (Oct) Expected 1.0%, Previous 0.2%
- 13:30GMT – (8:30 AM EST) CAD Retail Sales ex-Autos m/m (Oct) Expected 0.4%, Previous 0.6%
- 13:30GMT – (8:30 AM EST) CAD Leading Indicators m/m (Nov) Expected --- Previous 0.2%
- 14:00GMT – (8:30 AM EST) EUR ECB Weekly Financial Statement (Dec17) Expected --- Previous 914.23B
- 14:00GMT – (8:30 AM EST) EUR ECB Weekly Currency Reserves (Dec17) Expected --- Previous 167.5B
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