Wednesday April 13, 2005 - 09:48:24 GMT
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FOREX:US OPEN MARKET POINTS 04-13-05
Published By: Boris Schlossberg, Fundamental Analyst
UK Unemployment Stymies Cable’s Run
UK Unemployment increased by a surprising 11K claimants in March against expectations of a –3.5K decrease in jobless rolls. The news capped the pound’s strong recovery from yesterday’s post- Trade balance lows with the unit receding from the 1.8950 level in early European trade. The poor employment news was partly offset by the strong gains in earnings which increased by 4.7% on 3 month basis against expectations of only 4.4% rise. In fact the annualized rate of February’s monthly gains increased to a stunning 5.7% rate.
The GBP/USD was then caught in a tug of war between the depressing unemployment numbers and the clearly inflationary wage gains. Still, the unemployment data may carry more weight with the market for the time being as it is likely to have negative repercussions on Labor chances in the upcoming UK elections scheduled for May 5th. In recent days Tony Blair and Gordon Brown have patched their differences and appeared inseparable at many public events. The FX market does not doubt that Labor will score its third consecutive win, however, the new concerns are over the size of the Laborite majority. If Labor loses a significant number of seats to Tories or Liberal Democrats, Mr. Blair’s legislative power may be more restrained in his next term in office. The news also tempers the cable bulls argument for an unequivocal rate hike from the BOE and the market will now have to wait for the MPC minutes due April 20th to better understand BOE’ s intentions.
Meanwhile the European data continued to disappoint with French CPI rising a brisk 0.7% on a month to month basis while Italian Industrial Production scratched out a 0.1% gain for the first time in 5 months. Oil was the primarily culprit for both results as 4% monthly gains in crude translated into higher prices for clothing and foodstuffs in France while leaving Italian industry essentially moribund.
As we noted yesterday, given the record wide US Trade Deficit yesterday the market will now focus on TIC data on Friday to assure itself that US is still attracting the necessary funding. Today’s Retail Sales should shed some light on the strength of the US economy. Recent declines in Consumer Confidence surveys indicate that oil prices are starting to take their toll on consumers. If the Retail Sales miss their mark, they would offer fresh evidence of a possible economic slowdown
FX Spot Overnight
- EUR stays at 2950 recovering most of yesterdays losses
- JPY quiet at 107.30
- GBP capped at 8950 as diverging data offers no advantage to bulls or bears
- CHF hovers at 1960
- 12:30 GMT – (8:30 AM EST) USD Retail Sales Mar Expected 0.7% Previous 0.5%
- 12:30 GMT – (8:30 AM EST) USD Retail Sales Less Autos Mar Expected 0.6% Previous 0.4%
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