Monday May 24, 2004 - 11:31:39 GMT
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GVI FX STRATEGY SESSION NY OPEN
Trade early Monday has a summer feel to it with the eur/$ still in its 1.17 to 1.22 range and $/yen in its 110 to 115 band. No bias is evident within these ranges. Saudi Arabia appears to be coming through on its promise to boost oil production, but it is unclear if it is already operating at promised levels already or not. Equity markets are responding positively to the promise of additional supply. The formal OPEC meeting will be on June 3 in Beirut, where increased production will be ratified. It is unclear where actual global production stands at the moment. There apparently is a lot of cheating and political posturing by the various producers. The G7 in NYC over the weekend had little to say on forex. They referred back to a previous communique. Their focus was trying to get oil production higher as well.
Today is a national holiday in Canada, but PM Martin dissolved Parliament Sunday as expected and called for national elections for June 28. Recent polls have shown support for his Liberal Party has fallen to less than 40 percent from 50 percent when Martin succeeded Jean Chretien as prime minister in December. That puts Martin at risk of winning fewer than 155 of the 308 seats, and being forced to form a minority government. With fewer than 155 seats Martin would be forced to find allies in Parliament to pass bills and for so-called confidence votes, which he must win to stay in power. Forex markets tend to be uncomfortable with minority governments and this comes just as it appears that the interest rate advantage of Canada vs. the U.S. is about to be significantly eroded.
The prospect of increased global oil supplies provided the Nikkei with a modest lift on Monday, but such has not helped the yen much. Banking Minister Takenaka Monday had positive news to report on his portfolio. He noted that Bank non-performing loans could be down to 4% of their portfolios by September. With the exception of one, major banks in Japan returned to profitability on the year ending on March 31. The Financial Services Agency reports that the average ration of non-performing loans had fallen to 5.2% at that time from 7.2% a year earlier. Takenaka said that the 4% target could now be reached six months early, at the end of September. A healthier banking sector had always been an important element needed for a sustained economic recovery.
Looking ahead, this is a slow day on the economic data front, although President Bush will make a major speech this evening (00:00 GMT) on his plans for the Iraq transition. Tuesday will see the May Conference Board Consumer Confidence Survey. The street expects an outcome of 94.0 after 92.9 in April.
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