Thursday June 23, 2005 - 10:46:12 GMT
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Yen Eco Data Strong while Euro Continues to Flounder
Strong economic data out of Japan did not help the yen to rally in European session tonight, as euro weakness weighed on all “anti-dollar” currencies. Both the Large Firms Sentiment Index and the Tertiary Activity index reported better than expected results, printing 0.9% and 1.7% month over month gains respectively indicating that like an ocean liner at sea, the Japanese economy is slowly turning around. The data caused some analysts to upgrade their assessment of the upcoming important Tankan survey of business sentiment. The yen however did not react to the news essentially treading water between 108.50-108.70 levels. The unbelievably negative sentiment towards the euro has kept the dollar well bid and few analysts believe that yen will be able to rally until broad dollar weakness resumes.
Turning to Europe, the euro was sold through the 1.2100 barrier once more after Tony Blair stated that EU “will fail” if does not modernize and reform its antiquated price support system. Certainly the case of EU farmers which comprise 5% of the population and receive 80% of the union’s subsidies is an untenable situation and Mr. Chirac’s protestations to the contrary will have to be corrected one way or the other. While the market continues to fret about the political conflict taking its toll on the economic future of EU, we have argued that this may be just the kind of debate that the region needs to readjust itself to the new reality of the global economy. Say what you will about Mr. Blair but he has proven himself to be the most adroit politician within the G-8 universe and he may yet succeed at implementing his reform agenda during UK’s turn at the EU Presidency. With Mr. Schroeder now only pulling 29% of the vote ahead of the German national elections in September, he may have no choice but to heed Mr. Blair’s advice. The battle in the EUR/USD now rests between those who believe that EU is doomed to utter failure and those who speculate that the region will be able to weather even this serious crisis.
FX Spot Overnight
- EUR falls through the 2100 barrier after Blair comments
- JPY good data but treads water at 108.70
- GBP holds the 8200 figure after King speech leaves market confused
- CHF range trades 2740-2690
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