European releases overnight: January Forecast Actual
Swiss SVME PMI 60.3 61.6
Italian Manufacturing PMI 50.5 50.8
French Manufacturing PMI 53.5 53.9
German Manufacturing PMI 53.6 54.4
Euro-zone Manufacturing PMI 52.6 52.8
U.K. Manufacturing PMI 52.5 50.6
With the exception of the U.K. Europe’s manufacturing PMI data was all above expectations and go some way to counter last week’s confidence data. The German retail sales still remains as a concern and does indicate that, as we all know, there will be a further slowing in growth but it appears that businesses may be finding their optimum capacity which could bring some stabilization.
The big concern remains inflation and this will prevent any cut in rates for some while and by all means doesn’t rule out another hike, the question being timing more than anything else. This should keep the Euro on the firm side but the recent lack of momentum to push it through the 1.4966 November high is a sign that opening new exposure doesn’t hold much confidence. As for the U.K. the drop in manufacturing activity is a worry and with the financial services also likely to suffer there is risk of a continuing downward spiral as credit becomes tighter. On the contrary to the Euro the trend is most definitely lower for the Pound and this should continue for a further month or two. The only intermediate question is whether there will be any consolidation ahead of the move below the 1.9335 low seen so far this year.
U.S. releases overnight:
December Forecast Actual
U.S. Construction Spending (MoM) - 0.5% - 1.1% January
U.S. Change in Non-Farm Payrolls 65K - 17K
U.S. Unemployment Rate 5.0% 4.9%
U.S. Change in Manufacturing Payrolls - 20K - 28K
U.S. University of Michigan Confidence 79.0 78.4
U.S. ISM Manufacturing 47.5 50.7
Again a tale of two releases on Friday for the Dollar as expectations of a modest rise in non-farm payrolls turned into a small loss but the strong ISM balanced the books.
However, the ISM wasn’t as positive as the headline index with the employment component weak (thus confirming the non-farm payrolls) together with orders remaining soft and inventories higher. Consumer confidence is not abounding and the major factor still appears to be the timing of the passing of the fiscal stimulus package through the Senate. But politics will play its hand here as the comments from Bush have hardened as he spoke to employees at Hallmark Cards Inc. in Kansas City, Missouri. “There are certainly some troubling signs, serious signs that the economy is weakening and we've got to do something about it,” he said, “The sooner this package makes it to my desk... the better off our economy is going to be.” The comments suggest political pressure to provoke a faster pace of the bill through the Senate. It’ll happen but political games are probably the biggest risk now.
So much as warned the Dollar’s weakness on Friday failed to push through 1.4950 and has caused a pullback. The weakness doesn’t yet look over but we’re pretty close with Dollar cycle lows beginning to come into focus.
It should mean that the Dollar remains in a consolidation for a day or two but then see one last attempt lower over the coming 5-10 days and that should be it. Whether this represents the time frame of when the Senate will pass the fiscal stimulus package I don’t know, but the clear signals from the charts are a significant slowing in momentum in the Dollar’s move lower which at the time of expected cycle lows tends to slot hand in hand.
More later once the daily analysis has been done…
The following are economic releases from Asia due today:
Australia
Q4 House Price Index (QoQ) +3.0%
Q4 House Price Index (YoY) 11.8%
December Trade Balance AUD -2.0bn
January Australia TD Securities Inflation (MoM)
January Australia TD Securities Inflation (YoY) Japan January Monetary Base (YoY) +0.2% U.K. HBOS House Prices (MoM) +0.4%
U.K. HBOS House Prices (YoY) +4.5% | 
