Releases from Europe:    

January
German Retail Sales               (MoM)   +1.0%    +1.6%
German Retail Sales                (YoY)  - 2.1%    +0.6%
German CPI (F)                     (MoM)   - 0.4%   - 0.4%
German CPI (F)                      (YoY)   +2.7%    +2.8%

February
U.K. Nationwide House Prices   (MoM)   +0.0%    - 0.5%
U.K. Nationwide House Prices    (YoY)   +3.6%    +2.7%

German retails sales marked a strong recovery in January bringing the annual pace back into the black. Note that the annual pace recovered strongly due to the large dip last year following the sales tax hike.

Still, overall it does show that the German consumer is still hanging in there and this will help cushion the softness generated in other areas.

U.K. house prices continue to decline with the annual pace dipping to the lowest level in over 2 years at +2.7%. However, the building society pointed out that this had more to do with the dropping out of large rises a year ago.

Indeed they feel the decline is slowing and probably close to a base for the time being at least. They neither see a return to strong price gains for “some time to come.”

The following economic releases are due today:

December
Italian 2007 GDP                                 +1.7%  

January
U.K. M4 Money Supply (F)        (MoM)     +1.3%
U.K. M4 Money Supply (F)         (YoY)     12.9%
U.K. M4 Sterling Lending           GBP      21.6bn
Euro-zone CPI                        (MoM)     - 0.4%
Euro-zone CPI                         (YoY)     +3.2%
Euro-zone CPI Core                  (YoY)    +2.0%
Euro-zone Unemployment Rate                7.2%
U.S. Personal Income              (MoM)     +0.2%
U.S. Personal Spending            (MoM)    +0.2%

February
Italian CPI                             (MoM)     +0.2%
Italian CPI                              (YoY)     +2.9%
Euro-zone Business Climate Indicator        0.75
Euro-zone Consumer Confidence             -12.0
Euro-zone Economic Confidence              101.2
Euro-zone Industrial Confidence                 1.0
Euro-zone Services Confidence                 11.0
GfK Consumer Confidence Survey            -15.0
Swiss KOF Consumer Confidence                1.6
U.S. Chicago PMI                                    49.7
U.S. University of Michigan Confidence       70.0

It’s month end and the end of a week which has seen the Dollar sink lower on the back of poor data and increased prospects of a recession in the world’s largest economy. How things can change so dramatically in the space of 12 months.

One year ago the market was still sunning itself in the comfort of the globalization boom only to be hit by an earthquake that has been felt around the globe. Can the same crisis occur in Europe?

No say the Europeans. But had you asked Fed officials a year ago they would have provided exactly the same response.

Only now that the financial markets have been weakened the vulnerability to further shocks potentially brings the risk much closer…

Never-the-less there is no additional crisis until it occurs and until then the States and the Dollar will remain in the firing line. The fiscal stimulation package actually looks as if it may be too late having seen the rise in jobless claims which will see consumer confidence sinking further deeper.

The release calendar is full but so full the market generally sits back and refuses to react with just too much to absorb.

On top of that most of the data is from Europe and thus will have limited impact. We have CPI numbers and European confidence numbers. Yesterday’s PMI numbers were good but a prominent feature of recent surveys has been the deterioration in consumer confidence and this could well be a problem for industry.

Thus for the while the Dollar will remain under pressure though the near term looks as if a small pause is possible. Not that the market will buy Dollars with enthusiasm but in these days of uncertainty profits pocketed provides a comforting feeling.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  105.78-20    1.5315-22    1.0610-43    1.9946-71
Res:  105.06-42    1.5228-68    1.0525-60    1.9907-17

Spt:   103.98-36    1.5110-45    1.0453-83    1.9801-30
Spt:   103.26-44    1.4993-20    1.0395-10    1.9707-35

See Also

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