The Euro rallied nicely on Thursday:
----FXfocus: The euro rallied sharply today, sustaining a push through the $0.9100 level, with plenty of help from the late day plunge in US equities. The euro has shown a good deal of directionality when it comes to stocks, a function of thoughts of a pullback in the overweight US position on the part of European investors. Of interest, today?s rally did support our argument earlier this week that a steady ECB may actually be good for the euro...more-----
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-----FX focus : The Euro-dollar is poised to test and break above 0.9199 resistance which would complete a double base from 0.8850 targeting 0.9550. Dollar-yen failed to clear above 108.00 and whilst below there is in danger of returning to the 106.40 week low. Sterling/Euro fell to 1.6050 but key support at 1.5975/60 should hold near term----
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the thursday NYTimes had a very good article pointing
out that the Japanese had some items left out of their
financial statements, and the economic situation was
weaker than reported.
------Japan may undershoot growth target: Japan?s finance minister Miyazawa admitted Q4 GDP may have contracted 1.6% instead of 1.4% originally reported due to a decline in capital spending. He said that, as a result, the 0.6% FY growth target may not be met. The EPA?s Sakaiya rejected claims that the agency had manipulated data to make it look good for political reasons saying it was ?impossible?. Q1 growth of 2.4% q/q is needed to attain full year growth of 0.6%.--------
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-------Deflation persists in Japan: Japanese nationwide CPI rose 0.2% m/m but fell 0.8% y/y in April according to data released overnight. Meanwhile prices in the Tokyo area fell 0.2% m/m and were down 0.9% on the year. Clearly the threat of deflation has not passed. The decline was however largely a function of a good harvest and the downward impact this had on volatile fresh food component rather than anything more deep seated. Nevertheless it is difficult to escape the conclusion that deflation is lurking just below the surface indicating zero rates for a while yet.--------
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----German output to double but still not sustainable: The German VDMA plant and machinery association today released their April data showing a 7% y/y rise led by a 15% surge in domestic orders. It would be nice to think that the domestic demand situation may at last be showing signs of life. However the association chief warned that developments are not fully self sustainable. In other words, in the event of a sharp turn around in the euro-dollar rate, German growth would start to look sickly. Nevertheless, the association doubled their forecast for output this year from 3% to a staggering 6% citing improved utilisation and demand.-------
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-------07:02 ET
30-year: -4/32..6.115%....$-¾: 107.26....Euro-$: 0.9142
Overnight FX Summary : The euro-dollar has held a fairly tight 0.9115 to 0.9184 range on the day and currently stands near that high. Some earlier selling was reported on profit taking in the sterling euro cross but that?s proved short lived. The market is gunning for the key 0.9200 level ? a break of which completes a double base targeting the long term downtrend at 0.9550. Welteke said in a newspaper interview that he couldn?t rule out intervention ? but he?s said it before. The euro is cause for concern and 20-30% undervalued. "The economy is growing, the labour markets are becoming more flexible the growth in debt has stopped and tax reforms are going in the right direction?.when that?s recognised the external value of the euro will appreciate" he said...more------
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Korean liquidity Black hole?????
-------More Pain Abroad: While yet to be fully reflected in the Treasury market, our thoughts of another round pain in the global economic recovery are starting to gain some credibility. First in focus is Korea, where we have been bearish on the market, and particularly the won, since late last month. Reports today suggest that the liquidity black hole (a term used by our good friend Greg Weldon, author of Weldon's Money Monitor, email g-trader@worldnet.att.net for more details) is worsening, as Korea?s biggest conglomerate, Hyundai Group, was forced to ask creditors for an emergency loan of 50 bln won to stave off a liquidity crunch. More on this one throughout the day, but all we can say is that with a tighter Fed, things are likely to get much scarier when considering comments from the OECD last night noting that Korea has been among the front-runners of crisis-hit Asian countries when it comes to reform.------
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