Releases from Europe: March Forecast Actual
German Producer Prices (MoM) +0.5% +0.7%
German Producer Prices (YoY) +4.0% +4.2%
There has been a sudden absence of central bank officials commenting that the slowdown will naturally cause inflation to moderate. No doubt they will continue refrain following this week’s CPI figures and also today’s German PPI data which clearly demonstrated yet again that high oil prices are causing an abnormally large impact as more biochemical fuel crops are grown.
This doesn’t seem like an issue that is going to disappear soon either and with OPEC seemingly delighted with their windfall through crude oil prices being higher by 75% over the past year. They may argue that it is down to a lower Dollar but there is still a substantial differential between the rise in oil prices and the Dollar’s losses. The more this continues the greater the impact on consumer spending which could be the deciding factor between a shorter slowdown and a longer, more sustained slowdown or perhaps recession. A small snippet from the IMF’s Strauss-Kahn during an interview in which he forecast several quarters of negative growth from the States but which should bottom out by the end of this year or slightly into next. From then he anticipates a return to “more or less” swift growth. Well, as things stand now, that would appear to be a generally held view. However, there are lots of things that can happen in the meantime to upset the apple cart. Next year I have Dollar cycles turning bearish again – which may imply that something else will raise its head to cause problems…
The following economic releases are due today:
February
Italian Industrial Orders (MoM) - 0.5%
Italian Industrial Orders (YoY) +5.2%
Italian Industrial Sales (MoM) - 1.0%
Italian Industrial Sales (YoY)
March
U.K. PSNCR GBP 18.0bn
U.K. PSNB GBP 7.8bn
U.K. M4 Money Supply (MoM) +0.5%
U.K. M4 Money Supply (YoY) 11.6%
U.K. M4 Sterling Lending GBP 15.0bn
Asian traders looked at the data releases due out today and promptly decided they may as well close their books for the week.
If there is anything really on the slate to note it will be Citibank’s Q1 results. Forecasts center on a figure around $ -5.0bn. Coming after Merrill’s announced a loss of just $1.96bn which was much better than had been feared there are a number of analysts who view better results as a tentative sign that the worst of the credit crisis is over. Merrill’s also announced that they will be slashing 4,000 jobs worldwide to contain costs. Citibank has been talking the same book though the CEO has said that some savings will come from other areas rather than job cuts. In total Citibank are planning to slash 20% costs. Analysts have been bandying around a figure of 25,000 jobs to be cut. The other gossip in the market has been the reaction to Juncker’s comments. Some say that it highlights a sterner attitude to the market. However, while the comments suggest he is exceptionally naive to think that the market should bow and follow G7 statements the basic issue is that he has no control over the ECB and it is only the ECB that can decide whether to intervene in the market. Thus unless Trichet thinks the same his comments are his opinions only and will have no impact on trades placed. Having said that the resilience of the Dollar against the Swiss Franc and Japanese Yen suggests that the Dollar bearish sentiment is waning anyway and while a new Euro high is probable it probably won’t last for too long.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 103.93-04 1.6042-65 1.0171-17 2.0050-92
Res: 102.71-04 1.5950-82 1.0127-41 1.9994-22 Spt: 101.85-15 1.5850-70 1.0023-37 1.9880-20
Spt: 100.81-30 1.5775-02 0.9939-78 1.9816-40 | 
