European releases overnight: Euro-zone – December Forecast Actual
Money Supply M3 (YoY) 12.2% 12.1%
More talk than numbers from Europe yesterday and some of that talk being barbed comments aimed at the ECB chief Trichet.
The French Economy Minister Lagarde still presses the political perspective of wanting to discuss growth with the ECB, her comments being “What we politicians say is, 'Be careful, we obviously have to pay attention to price stability but today we also have to judge, we also have to ask the question of how we can support European growth.” Of course, it was only a red rag to a bull with Trichet firing back saying that interest rate cuts are not required to boost growth. He said, “If we were not credible on price stability we would increase market instability…So we are doing what is necessary, which is what we have always done, to ensure medium term price stability and to be credible.” One of Trichet’s positive points is his transparency and on the question of interest rates he has never budged from the hawkish stance while growth has been strong and now inflation beginning to gnaw at prices.
Surprisingly following the SNB chief’s hawkish stance his comments yesterday suggested that possibly there may be no need to hike rates, or to be accurate he stated there is no urgency to act. He still sees higher inflation in the short term but he feels that the moderation in the economy will act as a buffer. He now feels that 2% growth for the current year may be too optimistic.
On the contrary the BOE’s Blanchflower, who has been the dive amongst the MPC stated that U.K. rates are too restrictive, pointing out that the downside risks to growth are bigger than the inflation risks. He took the recent downturn in housing & properties as a worrying sign. Well, it does still ensure there is one dove among the group but there is no evidence that the MPC are about to cut rates again. U.S. releases overnight: December Forecast Actual
New Home Sales 649K 604K
New Home Sales (MoM) +0.2% - 4.7% The new home sales from the States were a shocker again, the decline over 2007 declining by 26.4% which marks a new record by beating the 23.1% loss seen in 1980. Over December sales reduced by -4.7% against forecasts of +0.2%. The average home price dropped by 10.9% while the inventory of homes for sale has now risen to a whopping 9.6 months.
The Dollar did ease lower over the day but hasn’t really pushed the boat home. Indeed, the movements have been pretty much in line with the Pro Commentary report yesterday and don’t change the basic view that the Dollar is not going anywhere right now.
The biggest news for the week is still the FOMC rate decision on Wednesday with the market still debating how much the cut will be – the market consensus beginning to control its urge for a 50bp cut to just 25bp which I mentioned yesterday. Overall this should keep the Dollar from surging in either direction but being towards the low of the range we should begin to see some strength back later today after a small dip lower. Given the recovery in the Dow Jones yesterday we should see the Nikkei recover also this morning following its dive lower yesterday and this should provide support for Dollar-Yen which is in the middle of a correction up to the 110.00 area again.
More later once the daily analysis has been done…
The following are economic releases from Asia due today:
December
Japan Unemployment Rate 3.9%
Japan Job-to-Applicant Ratio 0.99
Japan Overall Household Spending (YoY) - 0.3%
Japan Retail Sales (MoM) - 0.8%
Japan Retail Sales (YoY) +0.1%
Japan Large Retailers’ Sales (YoY) - 2.0% Australia NAB Business Confidence
Australia NAB Business Conditions
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