Wednesday April 28, 2004 - 20:55:38 GMT
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GVI -- Far East Open FX Strategy Session
Forex trade was volatile Wednesday and the dollar wound up on top. The logic of the markets was a bit hard to figure, but a news report that the Chinese Premier had indicated in an exclusive Reuters interview that China will have to take stern measures to keep the economy from overheating saw the price of precious metals and basic commodities tumble. Stocks and bonds fell as well. This all could be an overreaction.
Also, there was some carryover from the headlines out of the Middle East on Wednesday. Additional activity in Fallujah, Iraq Wednesday caused a case of the jitters early in New York along with reports that a couple of major International airports had been closed temporarily due to local threats. Terrorism fears can fade pretty fast if nothing serous materializes.
One key focus was preparations for the release of the U.S. 1Q04 GDP figure on Thursday. The street is widely expecting real annualized growth of 5% in the quarter, so there is ample room for disappointment on the report. The problem with the headline GDP figure is that inventory swings can have a major impact on the result. Rising inventories will boost GDP, but they might then have to be worked off, while falling inventories will depress GDP, but they might have to be restocked. The net export figure must include an estimate for March Trade since that figure is not out yet. Watch the Real Final Sales subcomponent, they are a cleaner measure of the strength of the economy. Estimates are for a rise of +4.2% after +3.6% in 4Q03.
Thursday also sees Weekly Jobless Claims. They are seen at a 340,000 level after 353,000 in the previous week. Jobless Claims at this level are consistent with monthly employment figures on the order of 150,000-200,000 per month Also, 1Q04 GDP is seen at 4.9% p.a., vs. +4.1% p.a. in 4Q03. Thursday marks the start of the Golden Days holidays in Japan.
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