European releases overnight: December Forecast Actual
U.K. Industrial Production (MoM) +0.2% - 0.1%
U.K. Industrial Production (YoY) +1.0% +0.6%
U.K. Manufacturing Production (MoM) +0.1% - 0.2%
U.K. Manufacturing Production (YoY) +0.3% +0.0%
German Factory Orders (MoM) - 2.0% - 1.7%
German Factory Orders (YoY) 11.1% +5.6%
The European story remains the same. The BOE cut as was widely expected while the ECB kept rates on hold for the 8th consecutive month.
The statement from the BOE commented, “The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued. In the United Kingdom, credit conditions for households and businesses are tightening. Consumer spending growth appears to have eased. Although the substantial fall in the sterling exchange rate is likely to promote re-balancing of total demand, output growth has moderated to around its historical average rate and business surveys suggest that further slowing is in prospect. These developments pose downside risks to the outlook for inflation.” However, they cautioned the market against expecting an aggressive easing saying that it needed to ensure that growth and inflation were balanced. Inflation is much too high and the slowdown has been mild so far. Indeed, they went as far as to say that “Some slowing of demand growth, by reducing the pressure on capacity, is likely to be necessary to return inflation to target in the medium term.” This appears to be a stance mid way between the aggressive easing in the States and the steadfastness of an unchanged ECB policy which has come under attack by leading economists. The ECB decision was by a unanimous vote as the committee remains transfixed with the level of inflation. At Trichet’s post meeting press conference he also acknowledged that “uncertainty about prospects for economic growth is unusually high,” but asserted that the “fundamentals of the euro area economy remain sound.” The subsequent drop in the Euro again shows that the market has abandoned the high-yield strategy amid increasing concern over the risk of a stronger slowdown in the Euro-zone. U.S. releases overnight: December Forecast Actual
U.S. Pending Home Sales (MoM) - 1.0% - 1.5%
U.S. Consumer Credit USD 7.2bn 4.5bn January
Continuing Claims (26th) 2710K (prior) 2790K February
Initial Jobless Claims (2nd) 378K (prior) 356K
More signs of sogginess within the U.S. economy, as if we really needed any more proof…
Pending home sales continues the housing woes while the fall in consumer credit brings it to the lowest level in 8 months. Retailers are now cutting jobs which will deepen the slump in confidence that can only lend support for the downward spiral. The U.S. administration must be on their knees by their beds every night praying for the fiscal stimulation package to be passed by the Senate quickly. On this there is reported to be some progress with the House Speaker Pelosi saying the House will vote on the final passage today. It could be a release to ease some of the fears but both Democrats and Republicans will be eager to see this put through ahead of the Presidential elections. The relief will end as soon as the next President steps into the Whitehouse.
And as expected, the Dollar ended higher by default rather than by any confidence in its value. However, it is opening the possibility of a stronger recovery in the medium term as daily and weekly cycles hit a low.
It will still find a barrier above 1.4309-64 Euro and probably around 1.1135-60 Swissie which could see a substantial pullback, but the foundation is in place for the fiscal stimulation package to create an air of relief. The passing of the package should also bring relief to the downward pressure in Dollar-Yen as investors relax. There has also been a lot of damage to the Japanese export market so expect the Yen to be weaker for a while. Following the correction the first move higher is likely to be generated more by the squaring out of short Dollar positions rather than a vote of confidence in the U.S. economy with the eventual high stalling around the end of March and maybe just into April. As for today Asia will remain subdued with Singapore and Hong Kong still away for Chinese New Year which will leave Europe to push the Dollar a little higher but probably see those positions squeezed into the close of trading.
More later once the daily analysis has been done…
The following are economic releases from Asia due today:
Japan – December
Machine Orders (MoM) - 0.9%
Machine Orders (YoY) - 1.1% Japan – January
Money Supply M2+CD (YoY) +2.1%
Broad Liquidity (YoY) +3.5%
Eco Watcher’s Survey: Current 35.5
Eco Watcher’s Survey: Outlook
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