DEVELOPMENTS TO WATCH TODAY: Sept 9 - New York
- Initial claims for unemployment benefits fell -44K to 319K in the week of Sep 4 after jumping to 363K the prior week largely given the Hurricane effect from the Southeast. The weekly level is the lowest since early July. Continued claims rose 20K in the week of Aug 28. Separately, August import prices shot 1.7% higher as petrol prices jumped 10%. Ex-petrol import prices rose 0.4% (3.2% yoy). August export prices fell -0.5% given a -9% plunge in agricultural prices. Ex-ag prices rose 0.4% (3.9% yoy).
- The Bank of England left its key interest rate at 4.75 percent as policy makers assess whether borrowing costs, already the highest in the Group of Seven industrialized nations, are constraining consumer demand. The Monetary Policy Committee led by Governor Mervyn King kept rates at a near three-year high after raising them in August to keep a lid on inflation, the fifth increase since November. Economists forecast no change, with some predicting higher rates in October or November. The bank signaled last month that borrowing costs may be nearing a peak when it released its quarterly inflation and economic growth forecasts, which projected a slowdown in the economy next year.
- German exports increased the most in almost two years in July, bolstering a recovery in Europe's biggest economy. Sales abroad, adjusted for seasonal changes, gained 3.6 percent from June, when they dropped 5 percent, the Federal Statistics Office in Wiesbaden said. Economists expected a gain of 2 percent, according to the median of forecasts. From a year ago, exports rose 7.9 percent. Exports alone fueled an acceleration in German economic growth in the second quarter, helping to boost sales at companies including Bayerische Motoren Werke AG and Hugo Boss AG. German factory orders rose for a third month in four in July and industrial production gained the most in nine months, a sign the nation remains dependent on global growth for its recovery.
- Higher energy prices are prompting economists to reduce U.S. growth forecasts for the third and fourth quarters of 2004. The world's largest economy will grow at a 3.7 percent annual rate from July through September, slower than the 3.9 percent estimated last month, according to the median of 61 forecasts. Economists have slashed a half percentage point from third-quarter forecasts over the past two months. Morgan Stanley's Richard Berner and Lehman Brothers Inc.'s Ethan Harris have cut second-half forecasts in the past month. Berner and his colleague David Greenlaw yesterday trimmed their forecast for gross domestic product growth from July through December to 4.2 percent at an annual rate from 4.8 percent.
- The International Energy Agency, the oil adviser to 26 industrialized nations, said prices might fall below $40 a barrel because consumers are ``well supplied'' with crude and inventories are rising. World output averaged 83.6 million barrels a day in August, up 300,000 from July and 2.6 percent more than this quarter's expected demand, the Paris-based agency said. Industrialized nations hold 0.3 percent more oil in storage than last year. IEA said in its Monthly Oil Market Report for September. ``Supply is running ahead of demand and stocks are building.'' The IEA maintained its forecasts for world demand, saying consumption will jump by 2.52 million barrels a day to 82.16 million. Growth next year will slow, rising by 1.77 million barrels a day to 83.92 million.
- Japanese machinery orders fell 11.3 percent in July, the biggest drop in almost three years, adding to evidence that the world's second-largest economy is slowing. Bonds rose and stocks fell. Core machinery orders, which exclude shipping and utilities, fell to 918.5 billion yen ($8.39 billion) from June, seasonally adjusted, the Cabinet Office said in Tokyo. The biggest drop since September 2001 exceeded the median 2.2 percent decline predicted by economists. Falling orders suggest Japanese makers of semiconductors and other electronics are scaling back their expectations for demand amid signs that export growth to China and other markets is faltering. Exports fell for the second month in July, and industrial production unexpectedly stalled.
- EUR/USD - no change in view -- the singe currency rose in line with U.S. treasuries, as acceleration in U.S. growth in the third quarter won't be as fast as expected. Investors appeared unconvinced that the economy is truly gaining traction again, per Mr. Greenspan, following a soft spot in growth. Earlier, the single currency turned around at 1.2028 -- at just slightly above the ideal 1.2000 downside target. As expected, the downmove was short-lived. Support did appear -- and so we are seeing the currency move back to 1.2220 resistance. We may see a prior pullback to 1.2160, but the next test of 1.2220 should go through, signalling further ascent to 1.2500 area.
- GBP/USD - no change in view -- the currency turned around at 1.7720 at just slightly above the ideal 1.7700 downside target; the currency has been to as high as 1.7910. It may pullback further to 1.7810 area, but the currency pair should rise further to just below 1.8000 later in the week.
- USD/JPY - the currency pair found minor support at 109.15 and has been to as high as 110.00 in the wake of the pathetic July machinery orders data. It may rise further to 110.10 - 110.20, but should continue to fall thereafter. The next targeted level may be 108.75 base, but any breach of support should bring about 107.00 quickly.
- USD/CHF - the currency pair topped out at 1.2800, found support at 1.2590, but may be facing a barrier at 1.2650. The downtrend reassert -- expect further declines to 1.2400 further out.
- USD/CAD -- no change in view -- the currency pair did recover towards 1.2950; the decline has resumed since then, which may lead to the 1.2680 base further out.
- AUD/USD - the currency pulled back to .6890 and may extend it further to .6885 base. A new rally come thereafter, which may eventually lead towards the .7100 top.
- NZD/USD - no change in view -- the currency pair has been to as high as .6550. Expect a pullback to .6510 area, but the uptrend resumes thereafter and make a move towards .6680.
- EUR/JPY - the cross rallied from 133.00 minor support and has been to 134.00 The recovery has indeed made it to 134.00, and once the barrier is taken out taken out, the rally may extend to 136.00.
- EUR/CHF - the cross rallied further and has been to 1.5400 -- which keeps the configuration positive and should advance further beyond the 1.5450 top at some point. The cross should then push through to 1.5500 and higher -- perhaps to 1.5600.
- EUR/GBP - the cross found support at circa .6782 -- the uptrend resumed from those lower levels, and has been to the .6840 target. We expect it to push through the range, which may trigger a rally to .7000.
- GBP/JPY - no change in view -- support at 193.73 may have been confirmed by the sustained upmove -- the cross should rise further to 196.50 area at least. It should make a downside correction thereafter after which a new uptrend focuses at 198.00 area.
- GBP/CHF - no change in view -- the cross did rally towards the 2.2700, but was hammered hard thereafter. The current pullback should find support at 2.2500 area again. And any rally above 2.2700 suggests that the sell-off is over, and the cross looks up to 2.300 focus once again.
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