European releases overnight:

U.K. - February                            Prior     Current
Rightmove House Prices  (MoM)   +0.8%     +3.2%
Rightmove House Prices   (YoY)   +3.4%     +5.8%

                                                Forecast   Actual
Swiss Adjusted Retail Sales  (YoY) +5.2%    +1.2%

U.K. house prices reversed the 4 month decline and actually made back some lost ground. This would normally cause the markets some concern as there are still expectations of another rate cut but this news is more likely to cause the BOE to dig their heels in while inflation is still at uncomfortable levels.

However, the Pound lost heavily on the day caused mainly, it would seem from the fact that the distressed Northern Rock bank which had been rocked by the subprime fears is going to be nationalized.

It may seem quite innocuous but having courted two possible bidders the government has opened the door for possible legal action by shareholders. Well, the Pound was due to decline anyway, and this could be the start of a new decline into the end of March.

Once the Teflon king of Europe the Swiss economy has fallen in over the past 2 months and yesterday provided another knee wobbling release as retail sales dropped heavily in December to a mere +1.2% YoY. The conservative consumer appears to have had their cage rattled by the credit crisis which seems to be a confirmation of last week’s dreadful ZEW survey.

Europe had a quiet day with no releases and was left to comments only. The German Chancellor Merkel offered her view that the bank crisis could last quite some time but was satisfied with the actions by the ECB.

Liikanen commented, “Economic growth is slowing also in the eurozone, as confidence sentiment has weakened and the financial turmoil is ongoing” saying he looked for this year’s growth to be below 2%.

The States was off for President’s Day so news was nowhere to be seen.

However, an interesting statement came from OPEC which told Reuters that they will not increase production. The group’s president declared it would be kept stable or possibly decreased when they meet in Vienna in early March.

While there is a natural drop off in demand in Q2 following the winter’s high demand, a decrease would threaten oil prices rising back to 0 to worsen the inflationary misery. At an extreme it could lead to stagflation.

Overall it was a typically sedate market yesterday with the States away but the Dollar did pullback higher following last week’s decline. The question now is whether the Dollar bullish cycles will take immediate effect or whether we are going to have to suffer a further 6-8 weeks of sideways consolidation until the next weekly cycle low.

The stats out this week can have some impact but don’t look strong enough to push the Dollar in either direction. This does seem to put the odds in favor of more consolidation but keep an eye out for signs of any break higher in the Dollar.

While it seems t0o early to begin discounting the impact of the fiscal stimulus package the dark horse may well be the increasing disenchantment with the Euro-zone which is no longer seen as being as robust as previously considered.

Basically the main threat is a higher Dollar. The question is more “when” and that is still an uncertainty.

More later once the daily analysis has been done…

The following economic releases are due from Asia:

Japan
January Nationwide Department Store Sales
January Tokyo Department Store Sales

Australia
January Preliminary BoP Imports

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