Thursday September 16, 2004 - 10:13:22 GMT
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US OPEN MARKET POINTS 09-16-04
The Kindness of Strangers
Will foreigners continue to invest money into US? That seems to be the central question of the day as all focus turns to the US Treasury International Capital Flow report. In recent months, as US Current Account deficits mushroomed to record levels. the TIC data set has become extraordinarily important to the FX market. With US presently requiring $1.8 billion per day of foreign inflow to keep the dollar steady, dealers scour the TIC report for any signs of capital outflow. This month the market expects net inflows of $65 Billion slightly lower than last month’s $72 Billion figure but sufficient to cover US needs.
An interesting note yesterday by Goldman Sach’ s Thomas Stolper and Fiona Lake questions the accuracy of TICS data. They write,” Typically, the TIC data shows a higher inflow than the balance of payments because the latter is corrected for fixed income redemptions, which are not properly recorded in the broker-based TIC data set. This gap implies that about $60bn-worth of US outflows were overlooked in the Q2 TIC data. This is important because the monthly TIC data is often compared to the monthly trade data to assess to strength of financing inflows. On the basis of the Q2 releases, it seems safe to knock off about $20bn per month from the inflow recorded in the TIC data.” If they are correct the recent TIC data may not be as benign as market believes. However, we seriously doubt that dealers will deeply contemplate the arcane reporting differences between the Current Account and the TIC reports. If the data prints better than expected the news should add to the generally bullish dollar tone generated by yesterday’s positive Empire State Manufacturing report and possibly send the pair below 2100. Should the TIC data seriously disappoint - in a move that has been almost commonplace in FX market lately - we could see a full unwind of yesterday’s dollar gain as the euro recaptures the 2200 handle and may try once more for 2300.
Meanwhile the pound received a much needed boost as retail sales print 0.6% versus –0.3% expected. Sales of clothing and footwear increased 3.7% the most since 2003 indicating that UK economy is still the strongest amongst the G-7 nations. Having tested the 7700 level twice, sterling may have finally found some short term support. The good retail numbers should now reignite speculation about an additional BOE rate hike.
FX Spot Overnight
- EUR moribund at 2150
- JPY loses the 110 handle in very quiet trade
- GBP spikes 50 points as retail data surprises to the upside
- CHF as quite as the euro as it awaits SNB announcement
12:00GMT – (8:00 AM EST) CHF SNB Rate Decision Expected at 0.8%, Previous 0.5%
12:30GMT – (8:30 AM EST) USD CPI m/m (Aug) Expected at 0.2%, Previous -0.1%
12:30GMT – (8:30 AM EST) USD CPI ex-Food Energy m/m (Aug) Expected at 0.2%, Previous 0.1%
12:30GMT – (8:30 AM EST) USD Initial Jobless Claims (Sept. 11) Expected at 346K, Previous 319K
13:00GMT – (9:00 AM EST) USD TIC data (August) Expected at $65Bn, Previous $72Bn
16:00GMT – (12:00 AM EST) USD Philly Fed (September) Expected at 26 , Previous 28.5
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