WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
27 May 2007

Sunday 

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€

The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.3410 level and was capped around the $1.3530 level. The pair lost about 60 pips last week. G8 finance ministers avoided exchange rates in their communiqué ahead of next month’s G8 meeting.  Buba reported the ECB must exercise “strong vigilance” and ECB’s Liebscher and Papademos warned against “complacency.” Trichet warned against wage price inflation and said labour productivity growth should guide wage hikes. Bank of Italy criticized the ECB’s reliance up the M3 money supply as an inflation indicator while Bundesbank supported its usefulness. Richmond Fed’s Lacker said inflation still remains a problem and that core inflation must recede to 1% - 2%.  Traders scaled back expectations the Fed will lower rates this year.

Data released in the U.S. last week saw the April Chicago Fed national activity index print at -0.10; April new orders for durable goods orders rose 0.6% m/m with March’s tally upwardly revised to 5.0%; April ex-aircraft, non-defense capital goods orders were up 1.2%, down from +4.4% in March; weekly initial jobless claims were up 15,000 to 311,000; continuing jobless claims were up 58,000 to 2.53 million; April new home sales were up 16.2%; and April existing home sales fell 2.6% to an annualized 5.99 million units. 

Data released in the eurozone last week saw the May ZEW economic expectations index improve to +24.0 from +16.5 in April; the March trade balance printed at +€7.4 billion; March industrial orders climbed +2.7% m/m and 8% y/y; Germany’s Ifo business climate index was unchanged at 108.6; the Belgian National Bank May business confidence indicator improved to 3.9; the German GfK consumer climate index for June improved to 7.3 from a revised 5.7 in May; German April import prices were up 0.9% m/m and 0.5% y/y; and French consumer spending was off 0.3% m/m and up 2.5% y/y.

Technical Outlook

Last week’s high (1) was right at the 23.6% retracement of the 1.3071-1.3671 range and last week’s low (2) was below the 38.2% retracement of the same range.  The 1.3480/ 1.3534/ 1.3680/ 1.3725/ 1.3800 levels represent upside resistance targets while the 1.3374/ 1.3302/ 1.3273/ 1.3176/ 1.3057 levels represent downside support targets.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥121.85 level and was supported around the ¥120.65 level.  The pair gained about 60 pips last week.  The Nikkei 225 stock index closed the week at ¥17,481.21. Finance minister Omi reportedly told German counterpart Steinbrueck that he doesn’t mind euro appreciation that results from yen carry trades. The government’s economic assessment was unchanged and noted “weakness in industrial production.” Minutes from BoJ’s Policy Board meeting recognized some upside inflation risks. North Korea test-fired short-range missiles into the Sea of Japan and prompted yen weakness.

Data released in Japan last week saw April supermarket sales fall 1.0% y/y, the sixteenth consecutive monthly decline; the April trade surplus climbed 51.8%; and core consumer prices fell 0.1% m/m in April, the third consecutive monthly decline.

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.6527 in the over-the-counter market, down from CNY 7.6686. The U.S. Treasury said Chinese reserves diversification should not impact U.S. asset prices.  Treasury chief Paulson said China is moving closer to a “market-determined (yuan).” China’s trade surplus is expected to exceed US$ 250 billion this year.  PBOC boss Zhou called the pace of yuan exchange rate reform as “good” and said the U.S. and China “agree on the general direction of currency reform.” Greenspan warned Chinese equity markets are headed for a “dramatic correction.”  China’s Wu pledged China will expand the yuan’s trading band in the future.

Technical Outlook

Last week’s high (1) was below the 61.8% retracement of the 135.13-101.67 range and last week’s low (2) was above the 76.4% retracement of the 122.17-115.14 range. Upside resistance targets remain the 122.35/ 125.90/ 127.23 levels while downside support targets remain the 120.85/ 120.34/ 119.48/ 118.66/ 117.39/ 116.80 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 1.9890 figure and was supported around the $1.9675 level.  The pair gained about 95 pips last week.  BoE’s MPC voted unanimously to lift the repo rate by +25bps in May and there was some chatter about a +50bps move.  Talk is now focusing on a +25bps hike in June.  CBI reported the number of firms expecting higher prices reached its highest level since March 1995. BoE’s Sentance pledged to keep “inflation under control.” The U.K. economy’s growth rate has exceeded its long-term average for five consecutive quarters.

Data released in the U.K. last week saw Rightmove May house prices rise 0.4% m/m; the M4 money supply expanded 1.4% m/m and 13.3% y/y; public sector net borrowing narrowed to ₤1.1 billion; BBA, BSA, and CML mortgage lending decelerated in April; Q1 business investment was off 1.3% q/q; the GDP deflator was up 3.2% in Q1, the strong quarterly rate since Q4 2003; and Q1 GDP was up +0.7% q/q and +2.9% y/y.

Technical Outlook

Last week’s high (1) was below the 23.6% retracement of the 1.9182-2.0131 range and last week’s low (2) was above the 50.0% retracement of the same range. Upside resistance targets include the 1.9915/ 1.9966/ 2.0029/ 2.0131 levels while downside support targets include the 1.9801/ 1.9768/ 1.9634/ 1.9548/ 1.9462/ 1.9355 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.2330 level and was supported around the CHF 1.2240 level. The pair gained about 10 pips last week.  SNB’s Jordan said a “further weakening of the franc” could engender inflation and will be “taken very seriously.”

Data released in Switzerland last week saw April producer and import prices climb 0.9% m/m and 2.6% y/y; the April ZEW economic expectations indicator rose to 0 from -3.5 in March; and the May KOF economic barometer climbed to 1.96 from 1.90 in April and 1.84 in March.

Technical Outlook

Last week’s high (1) was just above the 23.6% retracement of the 1.2768-1.1877 range and last week’s low (2) was above the 50.0% retracement of the 1.1877-1.2571 range.  Upside resistance targets include the 1.2323/ 1.2428/ 1.2558 levels while downside support targets include the 1.2214/ 1.2142/ 1.2087/ 1.1993/ 1.1920/ 1.1877 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 1.0775 level and was capped around the C$ 1.0900 figure.  The pair lost about 90 pips last week.  BoC chief Dodge said the  C$ is following its long-term fundamentals. Next month’s monetary policy report will likely warn against a rapidly appreciating loonie.  The Canadian dollar has not been this strong since December 1977.

Data released in Canada last week saw April leading indicators rise 0.4% m/m.

Technical Outlook

Last week’s high (1) was below the 23.6% retracement of the 1.1980-1.0927 range and last week’s low (2) was the weakest print since December 1977.  Upside resistance targets include the 1.0932/ 1.1030/ 1.1110/ 1.1179/ 1.1228/ 1.1332/ 1.1451/ 1.1579 levels while downside support targets include the 1.0775/ 1.0710/ 1.0640 levels.

AUD

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.8175 level and was capped around the US$ 0.8265 level. The pair lost about 45 pips last week.  NAB lifted its forecast for its 2007 base metals index by 36% y/y.

Data released last week saw the Westpac March leading index climb 4.4% y/y.

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 0.8390 – 0.8168 range and last week’s low (2) was below the 23.6% retracement of the 0.7678-0.8390 range.  Upside resistance targets include the 0.8220/ 0.8253/ 0.8338/ 0.8390/ 0.8425/ 0.8500 levels while downside support targets include the 0.8118/ 0.8034/ 0.7950 levels.

SCHEDULE

Sunday, 27 May 2007

all times GMT

(last release in parentheses)

2350     Japan               April corporate service prices (0.7% m/m)

2350     Japan               April corporate service prices (0.6% y/y)

Monday, 28 May 2007

all times GMT

(last release in parentheses)

N/A       CH                    Swiss financial markets closed

N/A       UK                    U.K. financial markets closed

N/A       US                    U.S. financial markets closed

N/A       Australia           April HIA new home sales

0100     Japan               Bank of Japan Governor Fukui speaks

2330     Japan               April jobless rate (4.0%)

2330     Japan               April overall household spending (0.1% y/y)

2350     Japan               April retail trade (-1.3% m/m)

2350     Japan               April retail trade (-0.7% y/y)

2350     Japan               April large retailers’ sales (-1.1% y/y)

Tuesday, 29 May 2007

all times GMT

(last release in parentheses)

N/A       Germany           May consumer price index (0.4% m/m)

N/A       Germany           May consumer price index (1.9% y/y)

N/A       Germany           May consumer price index, harmonized (0.4% m/m)

N/A       Germany           May consumer price index, harmonized (2.0% y/y)

0500     Japan               May small business confidence survey (49.6)

0615     CH                    April trade balance (CHF 670 million)

0800     CH                    April UBS consumption indicator (2.13)

0800     Eurozone          March current account (-€5.3 billion)

1300     Canada             Bank of Canada interest rate decision

1400     US                    May consumer confidence survey (104)

2245     NZ                    April building permits (-2.9% m/m)

2350     Japan               April shipments (-1.5% m/m)

2350     Japan               April industrial production (-0.3% m/m)

2350     Japan               April industrial production (2.0% y/y)

Wednesday, 30 May 2007

all times GMT

(last release in parentheses)

0020     Japan               Bank of Japan Governor Fukui speaks

0130     Australia           April retail sales (1.1% m/m)

0130     Australia           Q1 construction work done (4.3% q/q)

0300     NZ                    April M3 money supply (12.8% y/y)

0800     Italy                  April producer price index (0.4% m/m)

0800     Italy                  April producer price index (3.8% y/y)

0800     Eurozone          April M3 money supply (10.9% y/y)

0800     France              May PMI, retail (58.6)

0800     Germany           May PMI, retail (55.6)

0800     Italy                  May PMI, retail (47.5)

0800     Eurozone          May PMI, retail (54.6)

1100     US                    MBA mortgage applications (1.6%)

1145     US                    ICSC-UBS retail sales (-1.5%)

1215     US                    May ADP employment change (64,000)

1230     Canada             April industrial product price index (1.3% m/m)

1230     Canada             April raw materials price index (1.3% m/m)

1230     Canada             Q1 current account (C$ 3.0 billion)

1255     US                    Redbook retail sales (2.2%)

1400     Finland European Central Bank member Liikanen speaks

1700     UK                    Bank of England MPC member Blanchflower speaks

1800     US                    Federal Open Market Committee meeting minutes, 9 May

2200     France              April unemployment rate (8.3%)

2200     France              April unemployment change (34,000)

2301     UK                    May GfK consumer confidence survey (-6)

2330     Japan               May PMI, manufacturing (52.3)

Thursday, 31 May 2007

all times GMT

(last release in parentheses)

N/A       Greece              European Central Bank members Papademos and Weber speak

N/A       Belgium            European Central Bank member Gonzalez-Paramo speaks

0130     Japan               April labour cash earnings (-0.1% y/y)

0130     Japan               April overtime earnings (0.2% y/y)

0130     Australia           April private sector credit (1.2% m/m)

0130     Australia           April private sector credit (14.8% y/y)

0130     Australia           April trade balance (A$ -1.622 billion)

0300     NZ                    May NBNZ business confidence survey (-19.4)

0500     Japan               Bank of Japan Policy Board member Nishimura speaks

0500     Japan               April housing starts (5.5% y/y)

0500     Japan               April annualized housing starts (1.304 million)

0500     Japan               April construction orders (-1.6% y/y)

0545     CH                    Q1 GDP (0.5% q/q)

0545     CH                    Q1 GDP (2.2% y/y)

0600     UK                    May Nationwide house prices (0.9% m/m)

0600     UK                    May Nationwide house prices (10.2% y/y)

0600     Germany           April ILO unemployment rate (6.8%)

0645     France              May French consumer confidence (-20)

0650     France              April producer price index (0.3% m/m)

0650     France              April producer price index (2.1% y/y)

0755     Germany           May unemployment change (-9,000)

0755     Germany           May unemployment rate (9.2%)

0830     UK                    April M4 money supply (1.4% m/m)

0830     UK                    April M4 money supply (13.3% y/y)

0830     UK                    April M4 sterling lending (₤21.1 billion)

0830     UK                    April net consumer credit (₤0.9 billion)

0830     UK                    April net lending secured on dwellings (₤9.9 billion)

0830     UK                    April mortgage approvals (113,000)

0900     Eurozone          May consumer confidence survey (-4)

0900     Eurozone          May business climate survey (1.61)

0900     Eurozone          May economic confidence (111)

0900     Eurozone          May industrial confidence (7)

0900     Eurozone          May services confidence (22)

0900     Eurozone          May CPI, flash estimate (1.9% y/y)

0900     Italy                  May CPI, harmonized (0.6% m/m)

0900     Italy                  May CPI, harmonized (1.8% y/y)

1000     UK                    May CBI distributive trades reports, realized (44)

1000     UK                    May CBI distributive trades report, expected (36)

1230     US                    Q1 GDP, annualized (1.3%)

1230     US                    Q1 core personal consumption expenditures (2.2% q/q)

1230     US                    Weekly initial jobless claims (311,000)

1230     US                    Continuing jobless claims (2.529 million)

1230     Canada             March GDP (0.4% m/m)

1230     Canada             Q1 GDP, annualized (1.4%)

1230     Canada             Q1 GDP deflator (1.3% y/y)

1345     US                    May Chicago Purchasing Manager Index (52.9)

1400     US                    April construction spending (0.2% m/m)

1400     US                    Q1 house price index (1.1% q/q)

1430     US                    EIA crude oil stocks (2.0 million)

2330     Australia           May performance of manufacturing index (51.7)

Friday, 1 June 2007

all times GMT

(last release in parentheses)

0545     CH                    May consumer price index (1.1% m/m)

0545     CH                    May consumer price index (0.5% y/y)

0600     Germany           May retail sales (-0.4% m/m)

0600     Germany           May retail sales (0.5% y/y)

0630     Australia           May RBA commodity index (8.4%)

0730     Turkey   European Central Bank President Trichet speaks

0730     CH                    May PMI (61.9)

0755     Germany           May PMI, manufacturing (57)

0800     Eurozone          May PMI, manufacturing (55.4)

0830     UK                    May PMI, manufacturing (53.9)

0830     Greece              Federal Reserve Governor Kroszner speaks

0900     Eurozone          Q1 GDP (0.6% q/q)

0900     Eurozone          April unemployment rate (7.2%)

0900     Eurozone          European Commission GDP forecasts

1000     Italy                  European Central Bank member Bini-Smaghi speaks

1230     US                    April personal income (0.7% m/m)

1230     US                    April personal spending (0.3% m/m)

1230     US                    April PCE, core (0.0% m/m)

1230     US                    April PCE, core (2.1% y/y)

1230     US                    April PCE deflator (2.4% y/y)

1230     US                    May change in non-farm payrolls (88,000)

1230     US                    May unemployment rate (4.5%)

1230     US                    May average hourly earnings (0.2% m/m)

1230     US                    May average hourly earnings (3.7% y/y)

1400     US                    April pending homes sales (-4.9% m/m)

1400     US                    May ISM manufacturing survey (54.7)

1400     US                    May ISM manufacturing, prices paid (73)

1400     US                    University of Michigan consumer sentiment (88.7)

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.