04.16.08

Asian Forex Market Morning Update 16th April 2008

Posted in Currency, Forex, Forex Calendar, Forex Income, Forex Indicator, Forex Info, Forex News, Forex Signal at 3:24 am by yeop

European overnight releases:

February Forecast Actual
U.K. DCLG House Prices (YoY) +7.4% +6.7%

March
Italian CPI (MoM) +0.5% +0.5%
Italian CPI (YoY) +3.3% +3.3%
U.K. CPI (MoM) +0.6% +0.4%
U.K. CPI (YoY) +2.6% +2.5%
U.K. RPI (MoM) +0.5% +0.3%
U.K. RPI (YoY) +3.9% +3.8%

April
German ZEW Survey: Econ Sentiment - 30.0 - 44.8
German ZEW Survey: Current Situation +32.8 +33.2
Euro-zone ZEW Survey: Econ Sentiment - 33.0 - 40.7

The ZEW reported that “extraordinary high price pressure” has caused German sentiment to sharply deteriorate over the past month. While the current situation reading remains quite firm it seems as if long term implications of the credit crisis’ impact on consumers has brought a sense of reality about future levels of business activity.

Indeed, the economic outlook index plummeting to -40.7 is consistent with levels seen in 1992-1993 when the economy was in recession.

With the price of crude oil reaching new heights at $112.48 yesterday the clear signal is that consumers will have less to spend on other goods.

While this doesn’t mean that Germany or the Euro-zone will sink into recession, the combination of reduced availability of capital and the stricter controls on lending cannot impose anything but a drag on the economy.

However, one major shock to the European banking system could prove to be the nail in the coffin. If this comes from anywhere, then it’ll be the collapse of a high profile LBO.

And this piles more pressure onto the ECB which yesterday would have looked on as France announced higher inflation than expected. The record high in crude oil provoked a flurry of comments from ECB officials repeating that interest rates cannot be lowered and that anchoring inflation expectations is of the essence.

The Fed was saying that a year ago as well…

Alumnia and Juncker are still plugging the point that the Euro is overvalued. The IMF think the Dollar is undervalued. Perhaps the ECB will be buying Dollars from the IMF then…

States overnight releases:

March Forecast Actual
U.S. PPI (MoM) +0.7% +1.1%
U.S. PPI (YoY) +6.1% +6.9%
U.S. PPI ex food & energy (MoM) +0.2% +0.2%
U.S. PPI ex food & energy (YoY) +2.7% +2.7%

April
U.S. Empire Manufacturing - 18.0 +0.63
U.S. NAHB Housing Market Index +20.0 +20.0

And over in the States the New York Empire Fed index shocked everyone by turning a -18.0 value into +0.63 over April…

It’s a bit difficult to see from where the gains came. Employment was down, CAPEX was down (to the lowest level since 2003) and future shipments were down. New orders were up, price paid up, and shipments were up.

However, it was a good number and may well help the Dollar in the short run considering the German ZEW but more evidence of this nature is going to be need to cause the market to change their negative view.

The NAHB index remained steady but as they pointed out “With the traditional home-buying season now well under way, we have not seen the bump in sales activity that we normally would this time of year.”

With tougher lending criteria and the general reluctance to increase repayments there is little to provide any relief to the current situation. Many are hanging their hats onto the mortgage relief plan and the fiscal stimulus package but with consumers’ fears at high levels the risk still remains lower.

So with a combination of poor European numbers and modestly positive U.S. ones the Dollar has recovered and this should last a further day or two.

It doesn’t look as if it is going to be a sharp move and while there is still a little upside potential in Asian/early European trading this should be followed by consolidation before the next leg higher.

There following releases are due from Asia due today:

Australian February Westpac Leading Index (MoM)
Japan March Machine Tool Orders (F) (YoY) +2.9%

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