There have not been any releases from Europe as yet. Of interest is an interview with the former head economist of the IMF in a German newspaper who thinks the current turmoil will see the end of several small to medium sized banks. He also felt it possible that one large bank, probably from the U.S. could face significant distress. At the very least he sees global credit markets undergoing a sizable shrinking on the back of asset-backed securities being replaced by more transparent products. However, stabilization will probably require the entirety of 2008 to achieve during which time the Fed will cut rates further.
The following economic releases are due today:
December
U.S. Existing Home Sales 4.95mn
U.S. Existing Home Sales (MoM) - 1.0% January
Italian Consumer Confidence Index 106.5
German IFO: Business Climate 102.3
German IFO: Current Assessment 107.4
German IFO: Expectations 94.5
U.S. Initial Jobless Claims (19th) 320K
U.S. Continuing Claims (12th)
One bit of good news was the solid recovery in Asian stock markets in reaction to the late rally in the States. The lead should be followed by European bourses later today. However, it is much too early to claim victory. More investors are taking a breather to consolidate and take stock of recent news.
Numbers from Europe should be keenly watched today. Strong consumer spending was seen in France but was not backed up by confidence readings. Today’s Italian consumer confidence and Germany’s IFO survey will provide additional clues as to how European consumers are reacting and whether this will add to the economy’s woes. Equally the U.S. existing home sales and weekly jobless claims data have potential to influence – more on the downside if bad. However the most likely scenario for the Dollar right now is consolidation. The year has begun with a bonanza of fears, nervousness and confusion as rates have been slashed and the fiscal stimulation package that is planned to help carry the U.S. economy through the year. Now the market is also mulling over whether the ECB will cut rates to boost the economy. This seems like a tall order right now with Trichet having banged the hawkish drum again yesterday. However, if we see oil consolidate below $90 pb then the ECB may well consider the option. All this means range trading for the Dollar right now as short to medium term players hedge their bets and await information of the U.S. package. It’s likely to keep currency moves on the erratic side for the next 1 – 2 weeks. Beyond that Dollar cycles are suggesting a move higher…
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 107.90-40 1.4742-72 1.0995-25 1.9771-90
Res: 107.08-40 1.4644-83 1.0944-49 1.9590-35 Spt: 106.07-20 1.4549-93 1.0830-50 1.9453-90
Spt: 105.42-75 1.4439-86 1.0749-89 1.9383-08 | 
