Tuesday April 26, 2005 - 11:14:55 GMT
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FOREX:US OPEN MARKET POINTS 04-26-05
Yen Smiles, Euro Scowls
By far, the best economic news of the night comes from Japan where workers Household Spending unexpectedly rose by 1.7% -it’s biggest jump in almost a year while unemployment rate reached a new yearly low of 4.5%. The surprising jump in consumer spending is a clear sign of strength for the Japanese economy and indicates that the country may no longer be as vulnerable to demand from US and Europe. In our weekly piece we suggested that the major Pacific Rim economies may become the next epicenters of global demand (with Australia and New Zealand benefiting handsomely as well) ultimately surpassing Europe and North America in economic might. While, this is certainly a long term multi year thesis, tonight’s positive eco data from Japan, coming as it does at the time of $55/bbl oil and materially subdued consumer demand in the West, suggest that this dynamic may be beginning to take place. In any event, the night’s data prompted Goldman Sachs to raise it’ s already high estimate for Jan. -Mar. Japanese GDP to 4.1% from 2.8%. Although the yen did not rally against the dollar tonight it firmed against the euro gaining close to 40 points .
In Europe meanwhile the news continued to be down beat as the Germany’s six leading economic institutes lowered their forecast for German GDP in 2005 from 1.5% to 0.7% while estimating the unemployment rate to rise to an eye-popping 11.1% by year’s end. The forecast was based on $50/bbl price of oil in 2005 and $48/bll in 2006. This was hardly sunny news and the euro drifted downward for most of the session, but it stayed well above the 1.2952 low set yesterday.
On a brighter note, latest poll figures from Le Figaro reveal that while ‘nons’ still lead in France, the number has dropped materially from 60% just a week ago to 52% presently. As we noted yesterday with 28% of the population undecided, the EU Constitution vote is far from doomed. While this issue will undoubtedly hover over the market for the next month, it will most likely impact trading only as we go into the final stretch of the battle.
In the US today, another mild news day with Consumer Confidence the prime release of interest. The market already expects a lower number, so we would need to see a significant surprise to the downside in order to provide some support to euro bulls. With only a 40 point range in the European trade tonight, we are likely to continue the slow mind numbing grind until the release of the more significant data (German unemployment, US GDP) on Thursday.
FX Spot Overnight
- EUR in tight range at 2985
- JPY slightly below 106, data positive
- GBP weakens to 9060 as CBI reports materially worse
- CHF in sync with euro trading below 1900
- 13:00 GMT – (09:00 AM EST) NZD NBNZ Business Confidence (APR) Expected -- Previous -19.9%
- 14:00 GMT – (10:00 AM EST) USD Consumer Confidence (APR) Expected 98.0 Previous 102.4
- 14:00 GMT – (10:00 AM EST) USD New Home Sales (MAR) Expected 1200K Previous 1226K
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