Friday January 28, 2005 - 11:24:53 GMT
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FOREX: US OPEN MARKET POINTS 01-28-05
Yen Data Dour
After a temporary flutter down to the 102 level, when comments by People's Bank of China board member Yu regarding yuan revaluation were reported out of context, the yen progressively lost ground against the dollar as Japanese economic news turned decidedly bleak. Much to the surprise of the market Workers Household Spending declined a whopping –3.8% versus -0.6% expected while Tokyo CPI dropped yet another –0.5% against –0.3% projected extending deflation into 6th straight year. Even the seemingly positive unemployment numbers which at 4.4% were at the lowest level since 1998, contained seeds of gloom as both the participation rate and average hourly workweek significantly declined. Taken together with yesterdays disappointing Retail Trade numbers, recent economic data should offer serious concern to any yen bulls counting on a quick a pick up in Japanese economic growth.
The CNY revaluation issue may still muddy up the course of the trading in the pair next week, however, we firmly believe that no meaningful revaluation news will emerge from the G-7 meeting. Once that event risk is out of the way, the yen is likely to weaken against both the euro and the dollar as Japanese fundamentals are clearly weaker than the market’s expectation.
Another lackluster session in Europe as French economic news prints in line. Unemployment remains at 5 year highs of 9.9%, although the unemployment rolls decline by -11K – a positive surprise against 0K expectation. Business sentiment, however, does not improve materially as higher euro weighs on manufacturers. With Euro-zone data, unremarkable, attention will turn to today’s US GDP data which is forecast to decline to 3.5% from 4.0% last quarter. A surprise either way may nudge the pair out of its ever tightening range, although we think true movement will not come until next week when a busy economic calendar, FOMC decision and G-7 meeting should all contribute to a rise in volatility.
FX Spot Overnight
- EUR tight ranges 1.3025-3050 waiting for US data
- JPY may tag 104 as Japan data gloomy
- GBP trading 8850-80 awaiting US news as well
- CHF KOF weaker .42 vs. .47 and Swissie trades to 1860
- - 13:30GMT – (08:30 AM EST) USD GDP Annualized (4Q A) Expected 3.5% Previous 4.0%
- - 13:30GMT – (08:30 AM EST) USD Personal Consumption (4Q A) Expected 4.0%Previous 5.1%
- - 13:30GMT – (08:30 AM EST) USD GDP Price Deflator (4Q A) Expected 2.2% Previous 1.4%
- - 13:30GMT – (08:30 AM EST) USD Employment Cost Index (4Q) Expected 0.8% Previous 0.9%
- - 13:00GMT – (08:30 AM EST) CAD Industrial Product Price M/m Dec Expected 0.3%Previous -1.7%
- - 13:00GMT – (08:30 AM EST) CAD Raw Materials Price Index M/m Dec Expected 0.6% Previous -5.3%
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