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205892 Resource 128466 128654 128654 1212561485943 1212561485943 Controlled European Morning Update 4th June 2008

Dollar mixed in Asian trading

Releases from Australia:                                                         Forecast          Actual Q1 GDP                                  (QoQ)   +0.3%           +0.6% Q1 GDP                                   (YoY)   +2.8%           +3.6% May AiG Performance of Service Index      47.3 (prior)    49.7 Australia recorded a solid Q1 GDP with the YoY figure rising to +3.6% from the prior estimated 2.8%. Indeed, the economy for along while shrugged off the effects of the global credit crisis and continued to benefit from the persistent demand for commodities. With this result and the strong showing in domestic demand the RBA’s non-farm GDP forecast of 1.75% for the current year seems now to be too low and this could raise speculation that the CB will hike interest rates once again. Releases from Japan:                                                          Forecast     Actual Q1 Capital Spending                  (QoQ)   - 9.8%    - 4.9% Q1 Capital Spending ex software (QoQ)   - 7.6%    - 5.3%Equally while Japanese capital spending declined in Q1 it registered a much weaker decline than expected, so much so that there is potential for the Q1 GDP to be revised higher. Never-the-less over Q2 the signs of softening have been undeniable and seen in a squeeze in corporate profitability – a decline of 17.5%. However, the fact that the decline was less severe than anticipated is suggesting that there is a slowing in the pace of CAPEX decline. Even so Q1 marked the longest stretch of quarterly decline in capital spending since falling for three consecutive quarters between July to September 2002 and January to March 2003. Releases from the U.K.:                                                             Forecast   Actual U.K. May Nationwide Consumer Confidence    67.0      69.0Meanwhile consumer doom and gloom deepens in the U.K. which saw the Nationwide index weaken even further to 69.0 and marking a new record low for the series since it began in May 2004. The Nationwide commented, “Confidence in spending also took a big knock, but continued faith in the jobs market suggests that this is being driven by the squeeze on people's incomes from higher prices and weakness in the housing market, rather than fears over job security.” The following economic releases are due today:April Euro-zone Retail Sales         (MoM)      +0.2% Euro-zone Retail Sales          (YoY)      - 0.8%May French Services PMI                               50.7 German Services PMI                             53.7 Euro-zone Services PMI                          50.6 Euro-zone Composite PMI                      51.1 U.K. Services PMI                                  50.5 U.K. BRC Shop Price Index U.S. Challenger Job Cuts       (YoY)  U.S. ADP Employment Change            - 30.0K U.S. Non-Manufacturing ISM Composite   51.0June Euro-zone OECD Economic Outlook While I got my way in the end with a higher Dollar, even to the point of hitting the Euro low on the head, overall the patterns became a lot more complex yesterday and some do need a rethink. At the moment I am still modestly comfortable with what’s happening in the Euro but the Swissie and Pound are becoming pretty erratic.I have been tentatively making the assumption that the Euro is in a triangle pattern though it is very early in the pattern to actually confirm this. The reasoning was actually linked to the manner in which it declined to 1.0214 followed by the recovery to 1.0526. This also made an argument for a triangle here also but the apparent development of the Swissie version has been far more rapid – almost to the point of completion while the Euro is, as I mentioned, still at the early stages.I also have to consider the position in Euro-Yen for which I am basically bearish but find the expectation of a near term 106.82 peak in Dollar-Yen inconsistent with more medium term Dollar gains against the Europeans. Clearly something somewhere needs to give and if there is any more common ground between the currency pairs as a whole it is a bullish Dollar view. Clearly the Pound is under pressure (although the structure is unbelievably complicated,) Dollar Yen has a near term bullish outlook at the very least while completion of a triangle in the Swissie would tend to imply a further attempt higher. Maybe then the Euro could well see more sustainable losses.The wave development is in most cases fairly advanced in terms that a break could be seen quite soon. Having said that There are some short term resistance levels that would highlight risk of follow-through higher but would, at the same time, cause a short correction that would no doubt take us over the ECB rate decision tomorrow which would then just leave us Friday’s non-farm payrolls to navigate… Note important support and resistance areas:          USDJPY        EURUSD       USDCHF        GBPUSD Res:  106.55-82    1.5627-61    1.0585-23    1.9789-02 Res:  105.54-86    1.5515-40    1.0446-89    1.9675-05Spt:   104.80-90    1.5361-85    1.0356-86    1.9564-96 Spt:   103.46-86    1.5255-83    1.0296-20    1.9498-23 9 application/xml false Australia CAPEX capital spending consumer confidence currencies Forex FX GDP Japanese UK Interested in currency trading? 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