Latest news on Asian Morning Update 25th April 2008
| Has the Euro bubble burst? European releases overnight: March Forecast Actual April While retail sales in the U.K. were close to expectations the CBI Quarterly Industrial Trends survey saw a sharp deterioration in the outlook balance to zero in April versus +18 in March. The industrial orders balance also fell in April, registering -13 compared with +7 in the March survey. The CBI commented, “Fears of slowing demand alongside rising prices have become a reality in the manufacturing sector over the past quarter, as it readjusts to a weaker economic outlook.” It certainly doesn’t help the BOE with inflation still pushing higher while growth is coming under severe pressure. But this is the syndrome in which all industrialized nations find themselves. However, higher interest rates will not put a halt to inflationary pressures which are being fueled by abnormal factors right now. Even Germany looks like it will finally succumb to the same issues. The IFO survey was uniformly bearish and prompted their economist to note that a high Euro and high oil prices are finally having an impact on the economy. It suggested that the ECB should retain an unchanged policy. The Euro sank without trace following the release as realization dawned that the global slowdown is already taking its toll on the European economy. It will mean that Q2 will be much softer than many, probably including the ECB, had anticipated and will continue into the 3rd quarter at least.
April And as Europe begins to see the impact of the globalization bubble bursting even the States couldn’t muster any positive data to help the Dollar. New home sales were a disaster, doubly so given this should be the peak season for buying activity and shows that house buyers have more-or-less give up the ghost as far as expecting to sell their own property first before even coming to the point of remortgage and buying a new home. This is the lowest level in 16 years with the median price of a home seeing the largest decline since July 1970. Consumer confidence is going to remain low for some while with Morgan Stanley’s forecast of 10% of U.S. house owners living with negative equity looking like coming home to roost. But the Dollar moved higher much has been outlined here for a while now and it looks more likely that the Euro has found its high for the year. It’s not quite done and dusted and technically may not do so for some while, but the combination of movements seen yesterday does seem to ensure a period of strength. The initial drop shouldn’t be an out-and-out collapse but more a squaring of existing short positions as the market reappraises the balance between global economies. It should allow gains in Dollar-Yen to 106.82 over the coming 1-3 weeks while the Euro is likely to revisit the 1.5340 low and the Swissie probably above 1.0544. However, beyond that the market won’t give up on the Dollar bearish sentiment that quickly with the implication being softness into July. However, with the exception of Dollar-Yen we shouldn’t see new lows against European currencies. With today seeing a particularly sparse release calendar the follow-through on yesterday’s strength should be limited and more likely the Dollar will drift back into range.
The following releases are due from Asia due today: Japan – March Japan – April See Also
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