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191098 Resource 128466 128654 128654 1196399135702 1196399135702 Controlled European Morning Update 30th November 2007

A quiet Asia sees upward pressure on the Dollar

A slew of month-end stats from Japan provided mixed reading, but with a modestly positive outcome:                                                       Forecast   Actual Japan – October Unemployment Rate                             4.0%    4.0% Job-to-Applicant Ratio                                       1.02 Overall Household Spending  (YoY)      +1.0%   +0.6% National CPI                        (YoY)      +0.1%   +0.1% National CPI Core                 (YoY)        0.0%   +0.1%Japan - November Nomura/JMMA Manufacturing PMI                       50.8 Tokyo CPI                           (YoY)     +0.3%    +0.3% Tokyo CPI Core                    (YoY)    +0.0%     +0.1%The National CPI rate saw its first rise in 10 months in October at +0.1% YoY but possibly the Tokyo November rate of +0.3% YoY is a pointer to things to come. Economy Minister Ota jumped on the data to claim victory in the battle against deflation and this time she may well be right – courtesy of energy prices rather than any domestically driven rises. However, she was realistic enough to point out that while higher prices have finally appeared the bigger potential problem will be reduced margins in the small to medium sized businesses which have not been able to keep up with the larger national corporations. Together with the impact of a large percentage of Japan’s business finding hard to survive while the domestic market remains so subdued and the threat of increased consumer pessimism could provide a nasty problem to solve. Indeed, overall household spending fell back to just +0.6% YoY within a background of suffering confidence that will only be made worse with jobs harder to come by, the Jobs-to-Applicant Ratio dipping alarmingly to 1.02.Price hikes in household products are beginning to become more common in Japan and there is little corporations can do except pass on these externally forced rises. However, unless domestic Japan is able to increase wages the retail spending landscape is going to suffer. Overtime has been rising but can easily disappear so the economy still walks a tightrope.The improvement in the Nomura/JMMA PMI was encouraging and shows that exports remain alive propped up by sales into Asia, primarily China. The rise in the headline index above 50 bodes well for Q4 GDP as does the rise in the new orders index which also managed to not only remain above 50 but just made it to 51. So overall fairly positive for Japan but the fat lady ain’t singing yet. Two releases from Australia: The Q3 Current Account unexpectedly narrowed to A$ -15.59bn when forecasts had centered on a number closer to A$ -16.4bn. It does underline the strength of the economy but there shouldn’t be any excessive benefit to the Aussie from this. The other number was October’s Private Sector Credit which came in marginally below forecasts at +1.0% MoM. Expectations were for a rise of 1.1%. However, on the year credit has grown by a robust 15.4% fueled by business credit which was up by +1.4% MoM to bring the annual pace to 21.7%. Clearly there is still solid growth down-under and implies there should be a further rate hike a little way down the road. The following economic releases are due today:Q3 Swiss GDP                              (QoQ)     +0.7% Swiss GDP                               (YoY)     +2.6% Euro-zone GDP                       (QoQ)     +0.7% Euro-zone GDP                        (YoY)     +2.6%October Japan Housing Starts               (YoY)    -36.7% Japan Annual Housing Starts    (YoY)       834K Japan Construction Orders        (YoY)  German Retail Sales               (MoM)    - 0.4% German Retail Sales                (YoY)    +0.1% U.S. Personal Income                          +0.4% U.S. Personal Spending                        +0.3% U.S. PCE Core                       (MoM)      +0.2% U.S. PCE Core                        (YoY)      +1.8% U.S. PCE Deflator                   (YoY)      +2.8%November Swiss CPI                             (MoM)      +0.2% Swiss CPI                              (YoY)      +1.5% Italian CPI                           (MoM)      +0.3% Italian CPI                            (YoY)      +2.3% Euro-zone CPI (estimate)       (YoY)       +2.7% Euro-Zone Business Climate Indicator       0.75 Euro-zone Consumer Confidence             - 7.0 Euro-zone Economic Confidence              105.0 Euro-zone Industrial Confidence               +1.0 Euro-zone Services Confidence               +17.0 U.K. GfK Consumer Confidence Survey      - 9.0 U.S. Chicago Purchasing Manager             50.5 Yesterday’s movements remain pretty much in line with the view that the Dollar has made a low. In the short term there is still some ambiguity – mainly that the Dollar really hasn’t corrected too far against the Swissie which probably means the Dollar’s upside is still probably limited until we have seen a slightly deeper pullback. Until that point there does still seem to be some risk of minor new Dollar highs all round but I sense the larger rally will probably not happen until next week.This also applies to Dollar-Yen. It does seem set to make new highs today but I am rather reluctant to suggest it can get above the 111.30-60 area before a deeper pullback. There is still some faint risk of new lows, but we’ll take that step by step since there really isn’t too much time left before the year-end squeeze when liquidity will quickly evaporate from around 10-14 days time. For today I suspect some fairly choppy trading in which any Dollar gains will be sold into but equally any Dollar losses are likely to find willing buyers – a two way market which means that playing the range seems a more viable strategy. Note important support and resistance areas:         USDJPY        EURUSD       USDCHF       GBPUSD Res:  111.32-62    1.4834-68    1.1231-61    2.0740-50 Res:  110.47-77    1.4780-08    1.1208-17    2.0689-13Spt:   109.65-95    1.4675-10    1.1121-45    2.0558-94 Spt:   109.05-35    1.4602-53    1.1070-97    2.0516-30 9 application/xml false Australian CPI currencies current account Forex FX household spending Japan Manufacturing PMI Private Sector Credit Unemployment Thinking of switching to trade currencies? Learn about the opportunities in the Forex market 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; MEGAUPLOAD 1.0) 127.0.0.1 127.0.0.1 ICopsey 221.191.116.116 false true false false true 128466 blog blogsite/GFTForex/web