Thursday September 9, 2004 - 09:57:04 GMT
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Forex: US OPEN MARKET POINTS 09-09-04
Published By: Boris Schlossberg, Fundamental Analyst
Tough night in Asia Pacific as the terrorist bombing near the Australian embassy in Jakarta is weighing on the already heavy AUD. The Australian employment statistics missed by a mile with employment change coming in at –6.5K versus the expectation of 25K gain. The high cost of oil is forcing employers to postpone their hiring plans. Unemployment rate remained at 5.7% while consensus called for a decline to 5.6%. Both pieces of news may have material effects on the Australian election scheduled for October 9th. The incumbent John Howard is in a dead heat with the opposition leader Mark Latham and the current instability will only add volatility to the AUD.
In Japan meantime, the Machine Tool Order numbers print significantly worse at –11.3% vs. –2.2% expected as Japanese manufacturers quickly retract their orders in light of a consumption slowdown in the US. IFR Thomson notes that this is the latest economic report in a string of disappointing statistics pointing to the possibility that Japanese economy has slowed to a crawl. In their quick assessment of the Japanese economic situation they write,” Weakening demand in key export markets, the failure of the economy to create jobs and thus boost consumption, and rising oil and other commodity prices are all combining to hit spending, both consumption and investment. The data points to a sluggish output path in coming months.” We couldn’t agree more.
What can we say about Alan Greenspan’s testimony yesterday, except shame on us for accepting the consensus view that it would be a dollar supportive non-event. We have repeatedly disagreed with the Chairman’s Pollyannaish view and in fact Mr. Greenspan’s less than enthusiastic assessment of US economic affairs caused a 150 point rally in the euro and a 200 point gain in the pound by days end. The Fed Chairman specifically noted that inflation remained muted despite the rise in oil prices. While the market took his comments at face value we believe they were simply camouflage for admitting that US domestic demand has slowed markedly. Yesterday’s Beige Book data confirmed the mixed picture with manufacturing maintaining strength but consumption growth declining. The Fed’s optimistic bet that oil prices will recede quickly is not working. While there is certainly no guarantee that decline in oil would instantly improve economic growth, the opposite effect of having persistently high oil prices will almost assuredly depress US output for the foreseeable future. In the final analysis the 1.19-1.24 EUR/USD range remains in tact as there seems to be little evidence of a sustained US economic pick-up.
FX Spot Overnight
- EUR temporarily peeks through 2200 but mainly range trades 2170-2190 consolidating yesterday’s gains
- JPY heads back to 110 off very poor Machine Orders data
- GBP trades down to 7840 after weak Trade data
- CHF trades tight 2600-2630
11:00GMT – (7:00 AM EST) GBP Bank of England Rate Decision Expected at 4.75%, Previous 4.75%
12:15GMT – (8:15 AM EST) CAD Housing Starts Expected at 226.5K, Previous 218.7K
12:30GMT – (8:30 AM EST) CAD Capacity Utilization Q2 Expected at 84.3%, Previous 83.50%
12:30GMT – (8:30 AM EST) CAD New Housing Price Index m/m July Expected at 0.5%, Previous 0.7%
12:30GMT – (8:30 AM EST) USD Import Price Index m/m August Expected at 0.6%, Previous 0.2%
12:30GMT – (8:30 AM EST) USD Initial Jobless Claims (Sept 4) Expected at 346K, Previous 362K
14:00GMT – (10:00 AM EST) USD Wholesale Inventories (July) Expected at 0.6%, Previous 1.1%
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