Wednesday March 16, 2005 - 10:53:56 GMT
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FOREX: US OPEN MARKET POINTS 03-16-05
Yen in Mild Recovery While Euro in Mild Recession
Japan’s Economics Minister Takenaka noted tonight that Japan was in mild recovery and looking at the latest LEI data it is easy to concur with that assessment. The final LEI data printed at 54.5% slightly lower than the 55% predicted but still higher than at any time since August of 2004 and comfortably above the 50% expansion level. The Coincident Index meantime jumped to 90% from 27.3% the month prior indicating that recovery is in full force.
European data on the other hand reported its typical tepid results with Euro-zone New Car Registrations falling –2.3% due to a very sluggish economic environment while EZ core CPI registered the smallest rise since March of 2001 at 1.4% year over year gain. Although the nominal CPI rate jumped to 2.1%, the increases were solely attributable to higher oil costs which also drove up food costs. In the current economic environment of higher living costs but stagnant wages the ECB is very unlikely to raise rates in the near future as it would quite likely tip the region into a full blown recession.
Meanwhile, both currencies have bounced back from yesterday’s short-lived dollar rally which was triggered by better than expected TIC data. As we noted in our earlier commentary the headline TIC report hid a lot of problems for the greenback most notably the fact that Japan has started to liquidate its portfolio of US Treasury assets while China has stopped adding to its inventory. This dynamic clearly bodes badly for dollar longs who need constant financing from abroad to keep the dollar well bid. Today’s Current Account report, expected to reach a record deficit of over $180 Billion will do nothing to allay those fears. The euro and the yen are both rising, although interestingly enough EUR/JPY has lost some ground as the market begins to realize that euro may be overvalued relative to the yen.
FX Spot Overnight
- EUR bounces back to 3360 after finding support at 3300
- JPY down to 104.15 finding strong support
- GBP back to 9200 after lower than expected unemployment results
- CHF breaks through 1600 again.
- 13:30 GMT – (08:30 AM EST) USD Current Account Balance (4Q) Expected -$183.0B Previous -$164.7B
- 13:30 GMT – (08:30 AM EST) USD Housing Starts Feb Expected 2030K Previous 2159K
- 13:30 GMT – (08:30 AM EST) USD Building Permits Feb Expected 2062K Previous 2105K
- 14:15 GMT – (09:15 AM EST) USD Industrial Production Feb Expected 0.4% Previous 0.0%
- 14:15 GMT – (09:15 AM EST) USD Capacity Utilization Feb Jan Expected 79.2% Previous 79.0%
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