Releases from Europe:
                                                           Forecast    Actual   
April U.K. Nationwide House Prices  (YoY)                - 1.0%
March German Unemployment Change      - 30K         - 7K
March German Unemployment Rate           7.8%       7.9%

Nationwide confirmed the HomeTrack report earlier in the week by reporting that they have seen house prices decline by -1.0% over the past year, the first YoY decline in 12 years. Prices were hit by a combination of higher mortgage rates and tighter lending criteria which have caused a drop in mortgage approvals seen over the past six months.

The supply of unsold properties is rising which also contributes to lower prices. Together with a generally weaker economy and softer consumer confidence the lender is now expecting losses in prices over the rest of the year.

German unemployment failed to decline by as much as expected. It would be possible to interpret that as being a reflection of a slowing but it is only one month and other stats have held up. However, given the IFO and GfK surveys it will raise eyebrows and it will be something to watch over the coming month or two.

If the CEO of Siemens is to be understood then he is obviously expecting a slowdown. In a prepared speech he declared that it was obvious that the global economy will slow down. He commented, “Obviously, opinions differ on the intensity and duration of this slowdown,” and added “We expect the consequences of the crisis in the finance sector to be felt in other sectors in the course of next fiscal year. We already see first signs of greater cautiousness on the part of customers in our standard products business here in Germany.”

The following economic releases are due today:

Q1
U.S. GDP Annualized            (Q1 A)       0.4%
U.S. GDP Price Index            (Q1 A)      3.0%
U.S. Personal Consumption   (Q1 A)    +0.7%

March
Euro-zone Unemployment Rate            7.1%

April
Italian CPI                           (MoM)    +0.3%
Italian CPI                            (YoY)    +3.4%
Euro-zone CPI estimate          (YoY)    +3.4%
Euro-zone Business Climate Indicator      0.69
Euro-zone Consumer Confidence           -13.0
Euro-zone Economic Confidence              98.9
Euro-zone Industrial Confidence             - 1.0
Euro-zone Services Confidence               +9.0
Swiss KOF Leading Indicator                   1.46
U.S. ADP Employment Change               - 60K
U.S. Chicago PMI                                  48.0

And so both BOJ and government will pace their stony corridors awaiting the announcement of the States’ Q1 GDP praying for a number without a negative sign before it. They will also probably be wishing for an unchanged policy that signals the end of the Fed’s series of cuts as the marginal impact of each new 0.25% cut becomes wafer thin.

Even then the impact of higher oil prices is clearly having a deteriorating effect on consumer spending while lower industrial production will at the very least cause a reduction in overtime which has been the only element of wages that have brought any increase in household income.

What will the Fed do? Well, it has been debated to hell and comes down to one of two scenarios: either cut by 0.25% and call it a day or retain an unchanged policy. Frankly, given the impact of any cut in rates is limited there is probably little difference between the two.

That in itself should cause the market to reassess and probably cause the Dollar to gain further in the short to medium term. However, there has been no real reason to buy Dollars so any rally is unlikely to bite too deeply.

As for the GDP – well, it’s probably a tighter call than the FOMC decision and will go down to the wire with what could be a fairly strong knee jerk reaction but which will likely calm down until the FOMC makes its announcement…

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  104.81-17    1.5691-02    1.0470-10    1.9771-10
Res:  104.19-38    1.5595-20    1.0400-29    1.9700-10

Spt:   103.65-85    1.5497-39    1.0300-25    1.9590-33
Spt:   102.41-66    1.5404-38    1.0194-13    1.9480-95

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