Wednesday April 20, 2005 - 08:10:15 GMT
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FX Economic Release Alerts
Outlook: Consumer price inflation is expected to have accelerated to 0.5% in March from 0.4% in the previous month. Again, like last month, this number could unexpectedly come in higher than the Bloomberg median forecast. On the level of all items, we see a similar chain of events as last month with the previous day's PPI release posting a number above the estimate. However, the difference this time is that the core index was actually lower than expected. It's a good sign that the swelling energy costs, which peaked in March, reached a level high enough to hurt the pricing power of sellers of other goods. The same thing could end up happening on the consumer side. With the huge disappointment in March's retail sales, it's evident that stores felt the need to lower prices in order to attract business from customers who continued to feel the pinch at the pump. While inflation continues to advance, we have to keep in mind that the fact that it is being driven by energy costs is not a sign of a pickup in employment and economic activity, but rather a factor that could slow things down. If the CPI data lends support to this view, then it's quite possible that we don't see any large interest rate changes in the immediate future.
Previous: In February, the CPI surprised on the upside by a tenth of a percentage point in both overall and core measures, which ended up being 0.4% and 0.3% for the month. The most movement was seen in the 2% rise in energy costs, which also affected the core measure by feeding into transportation costs, which rose 0.8% in the month. Inflation in medical care and housing were also the highest they had been in the fast few months. Overall, annual consumer price inflation was pushed up to 3.0% with 2.4% excluding food and energy. This news came right after a higher than expected producer price index and the release of the latest FOMC rate decision to raise the benchmark rate by 25 basis points. Based on data such as this, there was a build-up of speculation regarding the dropping of the word "measured" from the Fed's official statement and the acceleration of tightening rate hikes.
EURUSD: Remains bullish, target 1.3150, support 1.3030 and 1.2990 must hold
GBPUSD: strong rise continued and trend remains up. But 1.9250 is strong resistance and may end this movement today. Support 1.9140, key at 1.9100.
USDJPY: continues bearish, trend-resistance 107.10, but at 106.90 it has reached the 38% correction of the march-ascent, expect it to trade sideways 106.70/107.30 now.
USDCHF: dollar still under pressure, room to continue towards 1.1600. Resistance at 1.1860 is the key, 1.1910 is another strong level, support 1.1785, next target 1.1720.
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