Latest news on European Mid Morning Update 27th May 2008
| Early European data forces the market to rethink its Dollar bearish view Releases from Europe: Q1 Forecast Actual April May June
“Only if consumers expect their incomes to increase in real terms this year - and as long as fears of inflation are also allayed - will they then be keen to loosen their purse strings once again.” Well, that says it all… The chances of incomes growing in real terms is very unlikely and the stance of the central banks in threatening to raise interest rates if wage settlements are too high will raise a more confrontational element to the situation. And France is clearly suffering the same lack of confidence which should ring some bells in the minds of ECB officials but they may just interpret the bells in a different way. Business confidence is low, consumer confidence is low and confrontation is being heightened between workers and central bankers while cash strapped business look on with horror… Not good signs…
April May
Services firms saw business volumes fall at rates similar to those seen in 2001 while costs accelerate rapidly. Professional services such as lawyers, accountants and architects also saw substantially lower business volumes. Very clearly cost cutting by both consumers and businesses are being seen in areas that are considered non-essential represent the first signs of a drive to control costs and this looks likely to continue over the coming months. And this is likely to be this week’s theme – confidence, or lack thereof… Already the German GfK consumer confidence suffered a sharp decline to 4.9 and we have plenty more to see from France, Italy, U.K., Japan and the States. These will also come along with consumer price data from the States, Germany and Japan. The IMF took an uncompromising stance in stating that central banks must stand firm against any increased wage demands at a time when union unrest is simmering in France and U.K. while globally consumers are tightening financial belts. As I have said before, they may just get through this year without any sizeable fallout, but the consumer in a further weakened position next year will raise the risk of a much stronger confrontation. Early numbers today have weakened the European currencies and this may lead to a little more downside. However, over the week expect the market to remain confused over the direction of the Dollar. This promises a rather volatile week but still, I feel with overall Dollar weakness but should find a significant low for the coming weeks.
USDJPY EURUSD USDCHF GBPUSD Spt: 102.72-05 1.5713-35 1.0203-14 1.9750-75 See Also
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