Very clearly with the U.K. and the States on holiday yesterday there is virtually no news to speak of, most coming from Friday.

The stats out on Friday provided mixed readings all round. Europe’s manufacturing still appears to be hanging on reasonably well but services are showing rather concerning slides which provide an unsettling background to the economy. Definitely still weakening, not drastically but with a soft underbelly.

The IMF piled on the pressure for the BOE by saying there was no room for interest rate cuts while the signs are for higher wage settlements. It’s a text book reaction but reality lies in people and emotions which adds spice to the mix when consumers’ futures are at stake. Indeed, the IMF suggested that the screws should be tightened “at the earliest clear signs of emergent nominal wage inflation.”

This should keep the Pound firm for a little while longer but the long term will see risks rising for a stronger slowdown and that will mean that recession is not a word that can be ignored…

From the U.S. the existing home sales failed to meet the pessimistic forecasts and provided a slightly better reading. No one is going to suggest that things are beginning to turn round but it does look as if the slide is taking a shallower gradient.

Finally from Japan yesterday the BOJ’s chief economist is expecting slower growth for the economy under the weight of high energy and raw materials costs. This will mean the CB will need to watch carefully the balance between slowing global demand and inflation. He also cautioned on the weakening consumer spending and deteriorating sentiment.

After a quiet start the rest of the week doesn’t look as if it will heat up that much. The main theme of the week appears to be consumer confidence and consumer prices. It seems more likely these will push the market back into a shroud of uncertainty over the near term.

The Dollar is still a little under pressure but the long weekend has taken the steam out of the losses seen over the past two weeks. It does still seem to be the underlying sentiment but what should be the last leg of this corrective decline could well prove to be more erratic.

We are still seeing mixed numbers from both sides of the Atlantic which doesn’t really generate enthusiasm for buying Dollars nor buying the Euro. The recovery in the Euro was partly founded on the renewed belief that the ECB may well hike rates but the PMI numbers are not really supporting this.

In the absence of any clear direction the Pound is more likely to be the recipient of more trading interest with the IMF’s comments likely to provide it with a boost back above 2.0.

More later once the daily analysis has been done…

The following releases are due from Asia due today:

Japan April Domestic Corporate Service Prices    (YoY)    +0.6%

See Also

• New to Forex?
  Learn more about currency trading

0   15   30   45   60   75   90   105   120   135   150   165   180   195   210   225   240   255   270   285   300   315   330   345   360   375   390   405