Wednesday May 26, 2004 - 11:24:51 GMT
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GVI FX STRATEGY SESSION-- NY OPEN
Trade looks very much to be technically driven at the present time with convictions on the dollar not very strong. It looks as though the markets have decided to go with the flow at the present time, as there seems to be no compelling scenario to trade against. There is talk of some remaining dollar selling to be done as a result of the reweighting of major global portfolio stock index. The oil scenario appears more to be a pretext for trade than a driving force in the markets, as what the markets are reacting to and how they are responding has become increasingly muddled when it comes to oil.
In Japan, the Nikkei put in a solid performance over the day, but it closed off its highs. The April trade surplus grew 30% against year ago levels to Y1.04tln. More importantly, the data indicated that consumer demand for imported products had grown. This is being taken as a positive sign that domestic confidence in the economy is on the upswing. Demand for the yen remains strong at current levels. There was talk about a 105 breakeven levels for exporters in the current fiscal year, so $/yen trade in the 110-115 range must be very positive for their profit picture. On the other hand too much yen weakness could create a problem for the economy because of the rising dollar price for oil. Japan is heavily dependent on imported oil.
In Europe the May German GfK Consumer Confidence survey fell 10 points to -18, its lowest level in ten months. They said that consumers are doubtful about a labor recovery and that Germany should not expect any impetus from private consumption. On the other hand the KOF Institute in Switzerland said its May Leading Indicator improved to 0.95 from 0.85 in April. They said that this is consistent with real GDP of 2.0% in 2004 and a 50bp hike in official rates in 2H04. All in all the picture for Europe remains mixed. There is still no compelling reason to rush into the euro.
On the N.Y. open April Durable Goods figures are expected. A fall of about 0.5% is expected after the 5.0% March increase. These data are hard to assess due to the volatile nature of this series, which often sees major revisions of previous data. New home sales are due at 14:00 GMT. There is a new warning about an Al-Qaeda attack this summer in the U.S. The AG and FBI Chief will speak on the issue at 18:00 GMT.
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