European Morning Update 30th January 2008
Asia sets the quiet tone prior to Q4 GDP and the FOMC decision
Releases from Australia:
January Prior Actual
DEWR Skilled Vacancies (MoM) +1.9% +1.1%
Releases from Japan:
December Forecast Actual
Industrial Production (MoM) +2.0% +1.4%
Industrial Production (YoY) +1.5% +0.7%
Vehicle Production (YoY) +3.8% (prior) +1.5%
Japan’s industrial production release was on the soft side bringing the annual pace to just +0.7%. The Ministry of Economy was prompted to downgrade its assessment of production for the first time in 7 months to “flat” from last month’s “gradually picking up.”
The decline in the housing market has contributed to fewer building starts and as a consequence has led to lower demand. Production is expected to weaken over the coming months on the back of the global slowdown.
This has also impacted on Japan’s vehicle production which saw the annualized production numbers dip to +1.5% in December from +3.8% in November. This is in spite of car companies launching new models in August and further underscores the reducing level of demand both domestically and globally.
The following economic releases are due today:
Q4
U.S. GDP Annualized (4Q A) +1.2%
U.S. Personal Consumption (4Q A) +2.8%
U.S. Core PCE (4Q A) +2.5%
December
U.K. M4 Money Supply (F) (MoM) +1.5%
U.K. M4 Money Supply (F) (YoY) 12.3%
U.K. M4 Sterling Lending (F) GBP
U.K. Net Consumer Credit GBP 1.1bn
January
French Business Survey: Overall Demand 18.0
Italian Retailer’s Confidence General
Italian Services Survey
Italian Bloomberg Retail PMI
French Bloomberg Retail PMI 51.0
German Bloomberg Retail PMI
Euro-zone Bloomberg Retail PMI
Swiss KOF Leading Indicator 1.95
U.S. ADP Employment Change 40K
The Fed is due to announce its rate decision
Without much in the way of movement yesterday there is not really very much to add from yesterday’s comments. The medium term outlook remains basically bullish Dollars although the next 5-10 days can still see some consolidation before any real move higher can develop.
Thus being towards the low of the recent ranges it should allow a relatively small stop loss.
A word on Dollar-Canada which has been slipping nicely in line with my analysis. This should continue over the course of the coming days with a base back around the 0.9755 low – and probably just a little further. That should then see the U.S. Dollar recover as elsewhere.
The Aussie has been a bit strange but that too is beginning to show potential signs of topping out. I am a little mixed between seeing a high right now or seeing a move back to 0.9018-48. However, beyond that the U.S. Dollar strength still looks on the cards here too.
And finally Euro-Yen which has been playing with erratic moves. This look as if it will remain basically choppy but with an underlying downward direction. It should be one-way and could well see some shorter term consolidation but the high at 159.11 does appear to complete an upward correction.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 107.88-20 1.4885-21 1.1015-55 2.0006-44
Res: 107.21-43 1.4796-32 1.0960-66 1.9927-62
Spt: 106.37-64 1.4705-28 1.0882-88 1.9845-50
Spt: 105.40-76 1.4610-59 1.0806-11 1.9747-81
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