Releases from Europe: April Forecast Actual
Italian Producer Prices (MoM) +0.7% +0.4%
Italian Producer Prices (YoY) +6.5% +6.3%
Euro-zone Unemployment Rate 7.1% 7.1%
May
Euro-zone CPI (est) (YoY) +3.5% +3.6%
Italian CPI (MoM) +0.3% +0.5%
Italian CPI (YoY) +3.3% +3.6%
Swiss KOF Leading Indicator 1.09 1.09
Releases from the States:
April Forecast Actual
Personal Income (MoM) +0.2% +0.2%
Personal Spending (MoM) +0.2% +0.2%
Core PCE (MoM) +0.1% +0.1%
Core PCE (YoY) +2.1% +2.1% May
Chicago Purchasing Manager 48.8 49.1
University of Michigan Confidence 59.5 59.8
Friday’s European data was mixed, the dreadfully poor German retail sales figure the stand-out provider of confusion following last week’s buoyant retail PMI. All cost and inflation numbers are still pointing higher with little respite from the uptrend in both oil and food prices.
Nor is there any compromise from European officials with Trichet now voicing vigilance in ensuring there is no wage/price spiral and saying that food and energy price increases don't feed through to other goods. Weber enforced Trichet’s comments that the oil price shock is no reason to abandon the ECB price goal. However, he was correct in his comments, “These surges represent the latest, and arguably the most worrying disturbance in a series of substantial upside price shocks the Euro-system has faced over the past decade.” Nice comments but in this situation interest rate hikes are a blunt tool and frankly he has no control over any of those factors… Numbers from the States were modestly positive once again, the Chicago PMI taking a further step back towards the 50 boom/bust equilibrium and the University of Michigan Confidence index ticking higher a little more as well. So as we start a new month the market is faced with unknowns in whether an interest rate is coming from either block and if so then when… As the market so often does it has brought forward the forecast of when the Fed will hike from next year back to around October with now some commentators suggesting that inflationary fears could now bring that date forward. Trichet talks a hawkish stance as do many other ECB members but the interesting twist compared to a year ago is that the U.S. economy is now providing signs of a bottoming process while Europe is seeing a rather erratic slowdown. Higher interest rates and slowing growth is not a market favored combination. However, it is further complicated by the fact that European growth, while slowing, is still positive while the States only has the promise of growth. Today sees the U.S. manufacturing ISM which is expected to edge very slightly higher. Indeed, recent figures have shown a mild improvement but we could even see a slightly more positive result. Europe’s PPI is expected tomorrow and should maintain the upward push in costs while later in the week the German industrial production numbers are expected to be very soft. Friday also sees the U.S. non-farm payrolls which on the basis of a rising trend in continuing claims is unlikely to provide a pretty result. With the market resorting to reacting to each and every number the prospect is for a choppy and volatile week for the Dollar but by Friday should be heading back lower, still within range. Indeed, this lack of conviction in the Dollar’s direction does look set to continue for another 1-2 weeks.
More later once the daily analysis has been done…
The following releases are due from Asia due today: Australia
April HIA New Home Sales (MoM)
April Retail Sales (MoM) +0.2%
May AiG Performance of Manufacturing
May TD Securities Inflation (MoM)
May TD Securities Inflation (YoY) Japan
April Labor Cash Earnings (YoY) +1.3%
May Vehicle Sales (YoY) | 
