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204479 Resource 128466 128654 128654 1211238902349 1211238902349 Controlled Asian Morning Update 20th May 2008

Another day ends in stalemate…

European releases overnight:March                                                Prior     Current     Euro-zone Construction Output  (MoM)  +1.2%   - 2.2% Euro-zone Construction Output  (YoY)   +4.3%   - 1.4% States releases overnight:                                                      Forecast     Actual April U.S. Leading Indicators                - 0.1%   +0.1% There were unexpected results from overnight releases with the Euro-zone clearly beginning to see the downturn even in March as construction output collapsed by -2.2% MoM and brought the YoY pace below zero to -1.4%. On the other side the U.S. leading indicators saw a modest rise verses consensus forecasts of a modest decline. Neither will have significant impact but tucked in the bottom draw to gather sentiment as time progresses.Having mentioned here the threat of a 1970’s style “winter of discontent” a few times over the past few weeks Trichet took up the thread and said that central banks made mistakes in allowing second-round effects to develop from oil price shock. If his comments about preventing high wage settlements are also taken into this comment then he seems to be taking his remit beyond reason. Already French workers are staging strikes and should inflation continue rising at this pace then you can bet your bottom Dollar they’ll spread into other countries also. A war of confrontation is hardly likely to benefit the economy either…Perhaps he should listen to George Soros who was interviewed by the BBC. He warned that the financial bubble of the past 25 years is coming to an end and that while the credit crisis may be on the mend the real fallout is still to hit global economies.Critically he echoed my concerns that the current mandate of most of the world's leading central banks - where their main focus was fighting inflation - meant there was limited scope for cutting interest rates to help economies recover. He described the position that the BOE find themselves is “like a Greek tragedy” since the CB cannot reverse their policy until the economy is forced into recession. It is “inevitable” he suggested that central banks would retain high interest rates too high for the good of the economy. As expected the Dollar’s losses were restricted yesterday and as we move into the BOJ rate decision today and the FOMC minutes tomorrow there is the usual risk of indecisive and erratic range trading. Clearly the BOJ will not be making any changes while the economy is clearly back in distress and neither is there much prospect of the FOMC minutes producing anything but comments that the majority feel that downside risks to the economy are balanced with current levels of interest rates. At his stage, while the credit markets are in a recuperating stage they are still fragile as Bernanke commented just last week. Therefore there cannot be any commitment, or hint of one, until stronger signs of a recovery begin to emerge. More of note is the German and Euro-zone ZEW survey results which are tucked between Italian industrial orders & sales and also a range of PPI figures. If anything can move the market today it will be the ZEW results. Consensus forecast has these mildly improving and any shortfall could undermine the Euro again. More later once the daily analysis has been done…The following releases are due from Asia due today:Australia May RBA board minutesJapan March Tertiary Industry Index   (MoM)   +0.5% March Leading Economic Index (F)        20.0% March Coincident Index (F)                   33.3% April Convenience Store Sales   (YoY) Bank of Japan rate decision                   0.5% Bank of Japan Monthly Report 9 application/xml false central banks construciton output currencies eiro-zone Forex FX George Soros inflation leading indicators recession Trichet US New to Forex? Learn 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; MS-RTC LM 8) 127.0.0.1 127.0.0.1 ICopsey 202.216.243.97 false true false false true 128466 blog blogsite/GFTForex/web