The Swiss SECO Consumer Climate provided a healthy picture of the economy in October, retaining a level of +15 from the previous month. Consensus forecast had expected a decline to +11. The survey is made over 1,100 families and looks at their expectations for economic conditions over the next 12 months. A level of +15 indicates general expectations of improvement although respondents do look for higher prices. The Swiss economy still appears to have evaded the worst of the credit crisis and the general Euro-zone slowdown although SNB officials do anticipate some impact over the coming months. French manufacturing and trade balance numbers were released fro the month of September confirming a sharp slowdown in the sector:
Forecast Actual
Industrial Production (MoM) - 0.5% - 1.1%
Industrial Production (YoY) +2.8% +1.1%
Manufacturing Production (MoM) - 0.5% - 1.3%
Manufacturing Production (YoY) +3.1% +1.4%
Trade Balance EUR -3.0bn -3.1bn It tends to reflect the soft PMI numbers which continued through October also. The strength of the Euro is most likely having impact along with reduced demand due to the general global slowdown caused by the credit crisis. It doesn’t bode well for Q3 GDP which is due to be announced next week.
The following economic releases are due today:
September
Italian Industrial Production (MoM) - 0.4%
Italian Industrial Production (YoY) +1.9%
U.K. Visible Trade Balance GBP -6.9bn
U.K. Total Trade Balance GBP -4.1bn
Euro-zone OECD Leading Indicator
U.S. Trade Balance USD -58.5bn October
U.S. Import Price Index (MoM) +1.1%
U.S. Import Price Index (YoY) November
University of Michigan Confidence (P) 80.0
We now approach end of the week with Asia continuing to drive down the Dollar into the long NY weekend. This will mean that by early European afternoon liquidity will begin to dry up and will lead to one of two possibilities: The Dollar will end the week close to lows or any excess short positions could well be squared to trigger a sharp recovery.
Which will it be? Well, to hold short positions over the weekend will require the market to be comfortable with their positions, a high level of confidence that the trend will remain lower next week. The main driving factors in the decline this week have been the market expectation that yesterday’s ECB meeting would bring about a rate hike; the announcement from a (non-financial) Chinese official suggesting the Euro could be favored to offset the weaker Dollar, though this was quickly refuted as meaning conversion of current Dollar holdings; large write offs of bad debt in Wall Street investment banks on the back of subprime losses; and finally the general expectation that the Fed will be cutting rates. However, even this latter belief has taken a battering with several Fed officials saying that the current balance is about right. So we have seen significant Dollar losses on several factors, all of which have not really seen fruition except the losses announced by Wall Street investment banks. It doesn’t mean to say that the market will reverse positions since sentiment does remain bearish, but the potential for a Dollar recovery is most certainly there. The question is more what would trigger such an event. The poor French Industrial and Manufacturing numbers have had an immediate toll on the Euro though this hasn’t dipped through key supports to trigger a larger fallout. It is quite possible but the ultimate test will be a substantial break of the 1.4612 low. Thus the greater risk is for the Dollar to close the week with a small recovery.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 114.00-50 1.4870-00 1.1310-45 2.1292-00
Res: 113.07-38 1.4771-05 1.1250-85 2.1174-00 Spt: 112.07-22 1.4650-90 1.1183-05 2.1030-60
Spt: 111.57-66 1.4604-12 1.1075-00 2.0972-90 | 
