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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: macavity who wrote (58214)	1/4/2005 9:09:44 AM
From: elmatador	Read Replies (2) \| Respond to of 74559

macavity USD supported by dismal economic growth prospects in Europe causes bottom. Euro Dives on Dour Data Zero GDP growth from France and the highest unemployment rate in Germany since 1997, helped to push the euro below the 1.3400 figure in active European trading today as the possible reality of looming economic stagnation in the Euro-zone suddenly hit the FX market. French GDP, hurt by a -0.2% decline in household consumption, registered 0% growth in the 3rd quarter against estimates of 0.1% gain. Higher oil prices and a weak employment situation caused French consumers to retrench. Meanwhile, weak employment was the story in Germany as well with unemployment claims rising to 17K from 10K expected. The German unemployment rate now stands at 10.8% and in a depressing bit of news for Chancellor Shroeder is actually higher than when he took office six years ago. Furthermore, Mr. Shroeder's recently enacted welfare reforms which call for those without a job to accept any job offers or risk losing benefits may add further hardship to an already grim consumer environment. According to our proprietary indicator, the euro broke its uptrend against the dollar on a daily basis as of yesterday. While its far too early to tell if the unit has topped out against the greenback, the price action is very consistent with our "consolidation" thesis. As we noted yesterday, "we are now likely to range and digest the latest up-move as focus turns to Friday's NFP report". Friday's payroll report will be key to determining market sentiment going forward. If US economy can generate more than 175K projected jobs in December, the Fed will be free to continue it's tightening policy unimpeded by economic concerns. At that point the dollar bulls will be able to claim both an interest spread and a growth rate advantage over the euro and will be able to make a stronger fundamental case that a near term top in the pair has been made.