News from Japan: February Japan Machine Tool Orders (F) (YoY) - 0.7% (prior) - 0.5% No early releases from Europe today. That just leaves the slight upward revision in Japan’s February machine tool orders which almost looks positive following yesterday’s massive machine orders. However, since the latter included an unusual number of one-off orders from steelmakers (353.4% YoY) and railways rolling stock (+287.6% YoY) it tends to outweigh the more negative numbers and in no way represents any real sustainable strength. And that sentiment is borne out by a survey of private sector economists who provided a consensus annualized pace of Q1 GDP growth of a mere +0.42%. This is a big step down from the estimate in February at +1.65%. However, they do see a pick up in Q2 to around 1.34% in annualized growth – though this is also down from February’s 1.98% forecast. On inflation they are looking for an annualized 0.85% in Q1 which is to edge lower to 0.65% by Q3. This may well be a little low. Price rises are being seen in Tokyo now and some are even being made in groups of companies at a time. Of these a range of companies raised prices on the 1st March while another group are rasing on April 1st. Personally I am seeing some good rising by between 5% and 10% which suggests the forecasts of less than 1% may well be on the low side… Of the 32 respondents 18 did not expect a rate hike until next year.
The following economic releases are due today:
January
U.K. DCLG House Prices (YoY) +7.5%
U.K. Leading Indicator Index (MoM)
U.K. Coincident Indicator Index (MoM)
U.S. Trade Balance USD -59.5bn March
German ZEW Survey: Current Situation 30.0
German ZEW Survey: Economic Sentiment -40.0
Euro-zone ZEW Survey: Economic Sentiment -42.0
Broad losses in Asian stock indexes have provided the Dollar with a small boost against regional currencies as Asia begins to react to the weakness of the U.S. economy. Otherwise the Dollar remains mixed against the major currencies as lack of new information causes a pause in the one-month downtrend.
Indeed the pause is expected to continue as this week’s economic releases provide little new information as to the condition of the U.S. economy. Today does have the German ZEW survey on the schedule with continue slippage expected in spite of the strong industrial production and PMI numbers over the past two months. More telling is the lack of investor confidence which saw the Euro-zone Sentix confidence dropping to a mere +0.4 in March. The market doesn’t really have any interest in buying Dollars and any correction will be more a factor of profit taking with medium term positions traders likely to sell into any significant recovery. The noise coming from Europe about the speed of the Dollar’s decline is not going unheard. While central bank intervention doesn’t appear to be on the cards at this point in time traders are aware that the circumstances of the recent decline are different to previous declines and there is now more reason for central banks to stem the Dollar’s one-way direction. As the Dollar declines the price of oil rises with it hitting $107 today. While the decline in the Dollar softens the blow for countries paying from non-Dollar sources the inflationary impact in the States will be unwelcomed by the Fed. At this stage with interest rates low they cannot afford to let inflation rise to increase the risk of stagflation. Thus while there is still risk of some consolidation today, the next larger move should be higher for the Dollar as the market takes a breather until after Easter.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 102.90-23 1.5459-72 1.0322-40 2.0248-83
Res: 102.36-66 1.5370-02 1.0250-83 2.0124-46 Spt: 101.40-80 1.5254-79 1.0131-65 2.0027-49
Spt: 100.70-20 1.5144-77 1.0095-10 1.9968-93 | 
