Releases from Europe:

February                                         Forecast   Actual
German Import Price Index    (MoM)   +0.6%    +1.1%
German Import Price Index     (YoY)   +5.4%    +5.9%

March
U.K. Nationwide House Prices  (MoM)   - 0.3%    - 0.6%
U.K. Nationwide House Prices   (YoY)   +2.0%     +1.1%
French Consumer Confidence               -35.0      - 36.0

In spite of U.K. building societies forecasting a recovery in house prices they continue to drop as March saw the rate of growth slow to its weakest level in 12 years and come within just over 1% of registering an annual decline.

The Nationwide now accept that further declines in prices are expected over the course of the year but still maintain this will be modest. This comes just 5 months after forecasting a stable year with little change.

It is no surprise then that the GfK/NOP U.K. consumer confidence index has crashed to its lowest level in 15 years at -19. That’s the 7th consecutive monthly fall. Only one year ago it was at -8. 

While U.K. numbers have reflected the same pattern of modest strength seen in Europe as a whole, the consumer remains wary of recession, the pullback in house prices and the possible impact of the credit crisis on the U.K.’s reliance on the financial services sector.

Even in mainland Europe where the manufacturing numbers have firmed up after the decline following last August’s market turmoil consumers remain subdued about the future. Consumer sentiment fell for the 9th consecutive month to its lowest ever reading at -36.0.

It does highlight that the consumer in general is being spooked by the global credit crunch and more by rising prices which is causing them to hold back from spending. This will be a concern and could poke a stick in the confidence that companies have been holding. Fragile indeed…

The following economic releases are due today:

Q4
U.K. GDP (F)                  (QoQ)    +0.6%
U.K. GDP (F)                   (YoY)    +2.9%

February
U.S. Personal Income      (MoM)   +0.3%
U.S. Personal Spending   (MoM)   +0.1%
U.S. PCE Core                 (MoM)   +0.1%
U.S. PCE Core                  (YoY)   +2.1%

March
German CPI (P)              (MoM)   +0.3%
German CPI (P)              (MoM)   +2.9%
French Bloomberg Retail PMI   
Italian Bloomberg Retail PMI   
German Bloomberg Retail PMI   
Euro-zone Bloomberg Retail PMI 
Swiss KOF Leading Indicator          +1.60  

We come to the end of a mostly quiet week with the Dollar held within range but having probed the downside over the past few days. Having spent a few days away from the office the major difference I see is the reduced hysteria regarding the Dollar. The market remains bearish but the relentless selling has dissipated – for now at least.

Indeed, early Europe has seen a firm Dollar at the outset. It hasn’t quite yet broken above key resistance levels but does appear to be close as indicated in the report earlier. If this persists into New York time the implication will be a longer period of consolidation for the Dollar as the market bides its time by watching for signs of the fiscal stimulus to take effect.

Having said that, it is a little early for any positive outcome from the package which could take until June to generate any improvement in the U.S. economy.

However, technically whether the Dollar reverses now or manages to reach the 1.5901 high the bigger risk is still for a period of correction.

Note important support and resistance areas:

          USDJPY       EURUSD        USDCHF       GBPUSD
Res:   101.03-23    1.5901-07    1.0064-08    2.0088-07
Res:   100.20-55    1.5835-57    0.9982-23    2.0000-20

Spt:     99.85-90    1.5725-55    0.9879-00    1.9908-40
Spt:     99.30-52    1.5639-60    0.9815-46    1.9810-40

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