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186826 Resource 128466 128654 128654 1192751596123 1192751596123 Controlled Asian Morning Update 19th October 2007

Dollar reaches new lows against the Euro ahead of the G7 conference

The BOE minutes this week showed that the committee warned that there were only a few signs that the economy was slowing down. Yesterday’s retail sales numbers confirmed that as far as the consumer is concerned it is still all systems go, pulling out their plastic cards to push September’s number up to +0.6% MoM and 6.3% YoY when forecasts had been more conservative at +0.1% and +5.5% respectively. The annual pace is the highest in 3 years. The only caveat to the robust number was the fact that end-summer sales provided incentive through heavy discounting. I say old bean, what’s a credit crunch? The U.K.’s public finances continue to show improvements on a year-on-year basis with September’s numbers coming reasonably close to expectations:     Forecast Actual PSNCR    GBP 12.5bn  9.0bn PSNB    GBP   6.1bn  6.9bn M4 Money Supply (MoM) +0.9%  +1.0% M4 Money Supply (YoY) 12.5%  12.8% M4 Sterling Lending  GBP 18.0bn  23.0bnThe public coffers are reaping the benefits of cumulative income tax and VAT which are higher than a year ago but corporate tax receipts moderated somewhat. Money supply is reasonably stable around 12%-13% YoY which is high, but does not unduly worry the BOE. On the whole fairly positive though should have no particular impact on the Pound. Over in the land of watches and clocks the Swiss ZEW survey improved over October by 10.7 points to -16, a much better result than the German survey earlier in the week. Current conditions were a bit softer but following the record trade surplus released earlier in the day it does still highlight a robust economy that must surely risk a hike in rates. Following the strong industrial production numbers earlier in the month the results appear to have been shown in the Euro-zone Trade Surplus which recorded a healthy EUR 1.3bn surplus in August. On a seasonally adjusted basis this rose to EUR 4.3bn. Forecasts were for flat and +0.2bn respectively. The cumulative total for the YTD is at EUR 19.1bn which hardly bares comparison to last year’s equivalent number at a deficit of EUR -23.5bn. It really does make you wonder why they are so concerned over the strength of the Euro… but BusinessEurope is still calling for action to prevent further Euro strength. Cake and icing are still desired for consumption…The weekly jobless claims data from the States saw a jump to 337K – much higher than the 312K forecast. Continuing Claims also saw a stronger than expected rise to 2534K. Not the sort of numbers that the Fed had expected following their statements that the jobs market was still sturdy but there may be a case to suggest that the Columbus Day holiday caused an anomaly. The Philadelphia Fed Index was broadly in line with forecasts coming in at 6.8 in October, and only slightly below the 7.0 forecast. However, there are a few components that cause concern with new orders jumping overboard and shipments dipped into negative territory. Inventories registered their lowest levels since Q1 2002. Only employment provided a lift with an increase of 5.1 to 12.6. The market chose to ignore the G7 meeting which starts later today in Washington, taking the Euro bull by the horns and pushing to new historic highs at 1.4309. The move confirms further gains and consequently further losses by the Dollar over the coming weeks with 1.4455 the next target while against the Swiss Franc a dip below the 1.1621 low looks very likely. However, whether this will begin today or whether the market will heed some semblance of restraint to keep the Dollar in a consolidation ahead of the weekend’s conference is not certain. I suspect a degree of restraint. It has become very clear that with only partial support for controls to be made on the Euro strength coming from within the ECB ranks and virtually no support elsewhere, the chances of any substantial statement that could provide any relief to the Dollar weakness is probably as close to zero as one could get. Even the pullback in the Dollar against the Yen provided further downward momentum but reached the 115.25 support outlined yesterday. Around here there should be a good base although a minor new low is possible. Otherwise with a virtually non-existent release calendar and the will to push further at low ebb before the weekend, the prospect is for a sleepy end of the week… More later when the analysis is complete.The following economic releases are due today from Asia.Japan August All Industry Activity Index   MoM) +1.1% Australia September New Motor Vehicle Sales Australia Q3 Import Price Index     (QoQ) - 1.0% Australia Q3 Export Price Index      (QoQ) - 0.5% 9 application/xml false currencies Euro Euro-zone Forex FX jobless Money supply retail sales Swiss trade surplus UK US ZEW New to Forex? Read more about the currency markets 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