European releases overnight: January Forecast Actual
Italian Consumer Confidence Index 106.5 102.2
German IFO: Business Climate 102.3 103.4
German IFO: Current Assessment 107.4 107.9
German IFO: Expectations 94.5 99.0 Biggest news from Europe was the buoyant German IFO survey results, clearly well above forecasts with businesses not at all nervous about the markets, still optimistic on exports. The IFO did offer their comment that interest rates should not be cut until H2 this year which would be music to Trichet’s ears… Indeed, in spite of talk that the ECB may well cut rates soon Trichet, who provides transparency in his statements has been more than clear in saying that inflation and price stability are the mandate for the central bank. Weber backs that transparency with his comments that rates are still accommodative with the medium term outlook positive. He even went as far as to say that “investor's expectations of rate reductions later this year may be wishful thinking.” The Soc Gen fraud is a shocker. Some heads will roll in the compliance department I suspect but there shouldn’t be any impact in exchange rates.
U.S. releases overnight:
December Forecast Actual
U.S. Existing Home Sales 4.95mn 4.89mn
U.S. Existing Home Sales (MoM) - 1.0% - 2.2% January
U.S. Initial Jobless Claims (19th) 320K 301K
U.S. Continuing Claims (12th) 2720K 2747K
The releases today were overtaken by the release of the details of the fiscal package. However, note the rather awful lurch lower again in existing home sales. While spring normally brings some seasonal recovery in this case it sounds more like the “recovery” will more likely bring stability rather than any gains. It will still be too difficult to get home loans and the specter of continuing foreclosures will still be a fear.
The fiscal stimulation package was announced though still has to be passed through the House and Senate. It comprises of a structure of tax rebates to families and a higher limit for the government-sponsored enterprises Fannie Mae and Freddie Mac which will be increased for one year. The Dollar immediately lost ground on the news while the Dow Jones and Nasdaq both rallied. It seems the two have decoupled once again. However, we remain with the market looking over both shoulders still, unwilling to open either short or long positions, uncertain of exactly how investors are going to react. The fact that we are at Dollar lows for the week and the next major event is Wednesday’s FOMC meeting that carries the doubled edged sword of a another rate cut there is little chance we shall see the Dollar taken to new lows. The week’s release calendar closes the week on a quiet note and that will almost certainly be the cue for the Dollar to edge back into the middle of the week’s range. Technically the Dollar has been performing as expected reaching the 1.4770-80 Euro and 1.0830-50 Swissie levels as indicated by yesterday’s Pro Commentary report and should now see the Dollar recover. This being the case, with Dollar cycles expected to find a low over the next 5-10 days the outlook is actually bullish. Patience is the word…
More later once the daily analysis has been done…
The following are economic releases from Asia due today:
Australia November Leading Index Japan – December Forecast
National CPI (YoY) +0.7%
National CPI Exc food & energy (YoY) - 0.1% Japan – January
Tokyo CPI (YoY) +0.3%
Tokyo CPI Exc food & energy (YoY) - 0.1% The BOJ December policy meeting minutes are due for publication | 
