Monday March 14, 2005 - 10:41:48 GMT
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Forex: US OPEN MARKET POINTS 03-14-05
Pound and Yen Command All the Attention
With no major releases from either Euro-zone or US scheduled for today, the EUR/USD quietly digested last weeks gains trading slightly lower throughout the European session. Meanwhile the true action the FX markets was in the pound and the yen as the two currencies went opposite ways in response to the latest news-flow.
In Japan, the disappointing narrowing of the Current Account surplus overwhelmed the better than expected GDP release. Japan’s Current Account printed at 777.9 Billion yen, lower than the expected 820 Billion yen. The decline in the surplus was the result of a wider than expected services deficit caused by record Japanese travel abroad. Although upon 1st glance the numbers appear yen negative and the market reaction so far confirms that opinion, the underlying results may actually suggest that the Japanese economy is stronger than it looks. With wages rising for the 2nd month out of 3, Japanese consumers are touring in record numbers. Such behavior connotes considerable consumer confidence and should ultimately translate into faster economic growth for the country in which consumer spending accounts for 60% of the GDP.
Meanwhile the pound received a boost from overnight PPI data which showed prices increasing at the fastest pace since 1995. While traders bid up cable on the assumption that BOE will be forced to hike rates in their May MPC meeting we are not so certain that will be the case. The vast majority of the hike was due to rises in oil and food. Both of those components are notoriously volatile and also highly correlated since high oil prices naturally increase food costs. While seasonally adjusted PPI is running at 2.6% year over year rate that hardly qualifies as runaway inflation and the BOE is likely to weigh additional evidence before making a final decision.
FX Spot Overnight
- EUR retraces to 3410 in consolidation of last week
- JPY targets 105 as weak Current Account data generates yen selling
- GBP trades back to 9200 after falling to 9160 following bullish PPI data
- CHF retraces some of its post Trade Balance gains trading to 1562
- 13:30 GMT – (08:30 AM EST) CAD New Motor Vehicle Sales m/m Jan Expected -1.0% Previous -3.1%
- 15:30 GMT – (10:30 AM EST) GBP Leading Indicator Index m/m Jan Expected -- Previous 0.0%
- 15:30 GMT – (10:30 AM EST) GBP Coincident Indicator Index m/m Jan Expected -- Previous 0.1%
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