Wednesday September 1, 2004 - 09:40:17 GMT
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US OPEN MARKET POINTS 09-01-04
Published By: Boris Schlossberg, Fundamental Analyst
From Japanese Industrial Production to UK Retail Sales to US Personal Income the unifying theme of the past two weeks has been economic slowdown. In Asia Pacific, the downward trend was first started by the miss of the Japanese GDP three weeks ago and followed by weak employment, household spending and CPI data. As is often the case, first reports of negative news were met with denial and assurances by analysts bullish on the currency, but the unmistakable signs of a faltering Japanese economy are clear. Typically these signs do not reverse quickly but tend to persist until the imbalances are worked out.
In UK five consecutive rate hikes by BOE have taken their toll on the consumer and on the housing market. Today’s Nationwide House Prices survey which registered the smallest gain in three years is the latest evidence that the UK housing bubble may have burst. Meanwhile the UK consumer is certainly feeling the decline in wealth as yesterday’s CBI Distributive Trades survey of retail trade showed a precipitous drop to 2 from 24 in the previous month.
In the US, yesterday’s Chicago PMI and Consumer Confidence numbers were the latest examples of slowing demand, while even in Europe - which briefly seemed to show some economic renaissance - tonight’s batch of lower than expected PMI data leads us to conclude that the export-led recovery may be short lived.
If our slowdown thesis is correct then the carry trades which have been so out of vogue with market lately may be back in fashion again. Note especially the crosses such as AUD/JPY. Today Australia reported 4.1% y/y GDP while its currency carries 525bp spread to the yen.
FX Spot Overnight
- EUR very tight range 2070-2090 as lackluster data caps upside
- JPY breaks the 109 handle in Asia trade but rallies back on dollar strength
- GBP weakens off miserable PMI but consolidates at 7950
- CHF 10 pip range of 2670-80 most of night
13:00GMT – (9:00 AM EST) CHF PMI (August) Expected at 55.7, Previous 55
14:00GMT – (10:00 AM EST) USD Construction Spending m/m (July) Expected at 0.4%, Previous -0.3%
14:00GMT – (10:00 AM EST) USD ISM Manufacturing (August) Expected at 60, Previous 62
14:00GMT – (10:00 AM EST) USD ISM Prices Paid (August) Expected at 79, Previous 77
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