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184776 Resource 128466 128654 128654 1191195877177 1191195877177 Controlled Asian Morning Update 1st October 2007

Dollar ends September on a soft note

Again, Friday brought a whole slew of data:September                                          Forecast    Actual Italian CPI incl tobacco             (MoM)    +0.1%     +0.0% Italian CPI incl tobacco              (YoY)    +1.8%     +1.7% Euro-zone CPI (Est)                               +2.1%     +2.1% Euro-zone Consumer Confidence               - 4.0      -  5.0 Euro-zone Industrial Confidence                +4.0       + 3.0 Euro-zone Economic Confidence                109.0     107.1 Euro-zone Services Confidence                 +19.0      +18.0 Euro-zone Business Climate Indicator        +1.30     +1.09 U.K. GfK Consumer Confidence Survey       -  6.0      -  7.0Following last week’s German & French CPI numbers the current situation does appear to show a continuing benign inflationary trend and if it wasn’t for the ECB’s forecasts of stronger upward pressure over the coming months one would be forgiven for thinking that there is actually little to be overly concerned about. However, oil prices have been high and this should prevent a significant decline which is clearly a problem. Just when the ECB will feel the immediate credit crunch risks are abating is uncertain but the prospects are still for another hike by year end. However, following the flying Q2 results the Euro-zone appears to be spluttering in a moderately accelerating pullback. The confidence numbers released on Friday were uniformly below forecasts and this has become a regular feature to numbers of late. Official comments still proclaim that all is well, and indeed, the economy does still continue to grow but the balance lies in how confident they are against how much more the pullback can develop before the critical mass of slower growth from both Europe and the States combines to a larger global slowdown.Over in the States we had slightly less in the way of releases but not as soft as forecast in most cases:August U.S. Personal Spending                   +0.4%     +0.6% U.S. Personal Income                      +0.4%    +0.3% U.S. PCE Deflator               (YoY)                   +1.8% U.S. PCE Core                   (MoM)     +0.1%     +0.1% U.S. Construction Spending (MoM)     - 0.2%    +0.2%September U.S. Chicago PMI                               53.0         54.2 U.S. University of Michigan Confidence  84.0         83.4The market is obviously clearly bearish on the States and the housing woes are certainly not going to go away that quickly. While this does provide a drag on GDP across the economy the impact of the subprime fallout still appears to have limited effect on the rest of the economy. Consumers are still spending with a solid rise seen in August at +0.6% MoM although personal income is still lagging, and will probably continue. Construction spending was the modest surprise with a result much better than the -0.2% forecast and actually turning in a gain of +0.2% MoM. This came more in the non-residential sector which rose +1.6% on the month. Private non-residential spending was up 2.3% on the month and is up 15.2% YoY. And the construction spending is supported by the Chicago PMI data which registered a rise to 54.2 which is the highest in 3 months. Forecasts had looked for a 53.0 level. However, at 54.2, while more positive than the doom-mongers the level of growth still remains subdued but does stave off increasing pessimism. And so we enter a new month wit the Dollar ending last week on a weaker note as suspected. Although the U.S. numbers are not as bad as feared there will be little let-up on the bearish sentiment and this is set to remain into the end of the year. However, it does appear to be a tale of two reactions. Dollar-Yen did also move lower on Friday, again as expected but there does appear to be a big divergence in outlook for the Dollar versus Europe as opposed to the Japanese Yen. Japan actually saw some good releases over Thursday and Friday with industrial production seemingly strong. However, the critical factor may well lie in the July earthquake which distorted the figures to the downside in July only to see these reversed in August. The question is whether the recovery seen in August is sustainable, and of that I have some doubts although order books do look generally firm. However, the outlook must be quite bleak for Japan exports which will be hit now by both the slowdown in the States and now in Europe. There is a greater balance of demand across the globe now with Asia taking up some of the slack, but this shouldn’t be relied upon at this time.Indeed, the technical outlook remains particularly bullish for the Dollar here and indeed may well see a critical low over the next 48 hours to allow a larger run higher over the next two months. Today’s Tankan Survey will likely be on the firm side today with current numbers looking firm, but depending on the numbers being sustainable is less certain.On the other hand the market remains locked into a Dollar bearish track against the Euro. However, the way lower does not look like as straight line and we should be prepared for a fairly significant number of pullbacks before the Dollar finds a low around the turn of the year.More later when the analysis is complete.The following economic releases are due today from Asia.Japan Q3 Tankan Large Manufacturer’s Index       21.0 Tankan Large Manufacturer’s Outlook    20.0 Tankan Non-Manufacturer’s Index         21.0 Tankan Non-Manufacturer’s Outlook      21.0 Tankan Large All Industries CAPEX        7.5%August Labor Cash Earnings Overtime EarningsSeptember Vehicle Sales   (YoY) 9 application/xml false business Chicago PMI confidence consumer currencies Euro-zone Forex FX industrial personal spending UK US New to Forex? Read more about currency trading http://www.gftforex.com/land/index.asp?aid=446 Mozilla/4.0 (compatible; MSIE 7.0; Windows NT 5.1; hc; .NET CLR 1.1.4322; .NET CLR 2.0.50727) 127.0.0.1 127.0.0.1 ICopsey false true false false true 128466 blog blogsite/GFTForex/web