Tuesday May 24, 2005 - 10:31:21 GMT
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FOREX: US OPEN MARKET POINTS 05-24-05
Can Euro Export Its Way Out of Trouble?
The economic data from the Euro-zone continues to disappoint tonight with the ZEW investor confidence survey sliding to 13.9 from 21 projected as fears of a global slowdown depress investors expectations of Germany’s export based economy. Exports, in fact, were the only bright spot of the EU calendar as the 2.9% growth in that sector was the primary reason for Germany’s 1.0% growth in Q1 GDP. Some analysts were worried that given the country’s 11.8% unemployment rate, German GDP growth would be even lower.
The stagnant state of economic affairs – neither recession, nor growth – is frustrating European politicians and businessmen alike. With US demand likely to moderate as Fed rate hikes filter through the economy, an export based approach to recovery is clearly not going to work for Europe. There are now more urgent calls on the ECB to lower rates in order to stimulate investment and consumption. Both the OECD and Wolfgang Clement, Germany’s economics minister have made remarks to that effect in the past several days. However, the conservative ECB, whose primary task is to guarantee price stability rather than economic growth has been non-committal.
Interestingly enough, the downbeat economic data has had little negative effect on the EUR/USD so far, most probably due to the fact that the recent dollar rally has created such a large positional bias towards dollar bulls that there are less new dollar longs left to push the pair lower.
On the US calendar today the Existing New Home Sales number could shed some light on the strength of US consumer demand. With 10 year rates near 4.0% the market expects sales to remain buoyant, but if the number misses to the downside, it may signal that US consumer is running into a wall, as the massive monetary stimulus of the past two years may be losing its effect.
FX Spot Overnight
- EUR trades to 2600 but sells off after ZEW data
- JPY at 107.50 despite weaker than expected Tertiary numbers
- GBP bounces to 8320 on short covering
- CHF holds 2300
- 12:30 GMT – (8:30 AM EST) CAD Leading Indicators m/m APR Expected 0.2% Previous 0.2%
- 14:00 GMT – (10:00 AM EST) USD Existing Home Sales APR Expected 6.9M Previous 6.89M
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