Monday February 28, 2005 - 11:06:24 GMT
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FOREX: US OPEN MARKET POINTS 02-28-05
Japan Comes Roaring Back Lifting the Yen
In a stunning reversal of fortune, Japanese data reported much better than expected results from many segments of the economy lending strong support to yen bull’s argument that the country’s technical recession was nothing more than a temporary pause in growth caused by inventory adjustment of the Industrial sector.
Data as diverse as Industrial Production and Retail Sales all recorded very positive results spurring a 100 point rally in yen. Industrial Production increased 2.1% vs. 1.5% led by demand for chips in electronics components like MP3 players. Retail sales registered double digit gains in food and clothing with seasonally adjusted month over month numbers jumping 5.7% which was the highest value in the last 5 years. Even housing starts perked up materially increasing to 1.307 Million units from 1.188 Million expected.
Tonight’s economic news clearly casts a different light on Japanese performance. Since Japan’s economy is far better positioned to benefit from any pick up in global demand than the moribund Euro-zone, traders who are long EUR/JPY - having enjoyed an uninterrupted uptrend for the month of February - may soon be jarred from their complacency and begin to liquidate positions as the market absorbs the news of relative superiority of the Japanese economy.
As though on cue, European data continues to disappoint. Both the Services and Economic Confidence surveys report lower than projected (98.8 vs. 100.4 and 10 vs. 13) as the grinding effects of high euro and chronic unemployment depress Euro-zone economic output. So far the unit has refused to buckle as its attractiveness as the “anti-dollar” outweighs the lackluster economic performance it represents. However, this divergence between sentiment and fundamentals cannot last indefinitely. If the Euro-zone economy cannot show marked improvement soon, the euro strength against the dollar and most certainly against the yen will begin to wane.
FX Spot Overnight
- EUR ranges 3240-3260 shrugging off soft data
- JPY reaches 104.25 as eco data vastly better than expected
- GBP trades very tight as data neutral
- CHF bases at 1590
- 12:30GMT – (07:30 AM EST) CAD Consumption Spending (Q4) Expected 1.5% Previous 3.0%
- 13:30GMT – (08:30 AM EST) CAD Gross Domestic Products m/m (DEC) Expected 0.2% Previous 0.2%
- 13:30GMT – (08:30 AM EST) CAD GDP Deflator (Q4) Expected 2.5% Previous 3.5%
- 13:30GMT – (08:30 AM EST) CAD Quarterly GDP Annualized (4Q) Expected 1.7% Previous 3.2%
- 13:30GMT – (08:30 AM EST) USD Personal Income (JAN) Expected –2.8% Previous 3.7%
- 13:30GMT – (08:30 AM EST) USD Personal Spending (JAN) Expected 0.1% Previous 0.8%
- - 13:30GMT – (08:30 AM EST) USD PCE Deflator y/y (JAN) Expected ---- Previous 2.4%
- - 13:30GMT – (08:30 AM EST) USD PCE Core y/y (JAN) Expected ---- Previous 1.5%
- - 15:00GMT – (10:00 AM EST) USD Chicago Purchasing Manager (FEB) Expected 60.2 Previous 62.4
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