WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
24 June 2007

Sunday 

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€

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3470 level and was supported around the $1.3370 level. The pair gained about 80 pips last week. ECB’s Garganas member reiterated the ECB’s monetary policy remains “accommodative.” Sarkozy’s party won a small electoral majority last weekend.  Germany’s RWI institute lifted its 2007 GDP forecast to 2.5% and HWWI lifted its estimate to 2.8%. ECB’s Bini Smaghi reported “Monetary policy looks at asset prices, we don't target them…and the signals that are coming form there suggest that in some areas, monetary policy might be too accommodative." Treasury chief Paulson noted “currency reform is not going to eliminate the U.S.’s trade deficit” and said the U.S. housing slump appears near its end. The EU Parliament approved Malta’s and Cyprus’s adoption of the euro as of 1 January 2008. 

Data released in the U.S. last week saw national chain store sales fall 0.8% m/m in the first two weeks of June; May housing starts were off 2.1% to a 1.474 million unit annualized pace; housing permits rose 3.0% to 1.501 million units; the June NAHB housing market index receded to +28, its weakest print since February 1991; weekly initial jobless claims were up 10,000 to 324,000 with continuing jobless claims up 39,000 to 2.523 million; leading economic indicators were up 0.3% in May; and the Philadelphia Fed manufacturing index came in at 18.0.

Data released in the eurozone last week saw the German ZEW economic sentiment index decline to +20.3; the provisional EMU-13 June services PMI index rose to 58.3; the EMU-13 manufacturing PMI index rose to 55.4; the German Ifo business climate indicator fell to 107.0 from 108.6 in May; EMU-13 April industrial orders were off 0.4% m/m and up 12.2% y/y; and the Belgian National Bank’s June business confidence indicator rallied to 5.5.

Technical Outlook

Last week’s high (1) was right around the 50.0% retracement of the 1.3680-1.3261 range and last week’s low (2) was just below the 50.0% retracement of the 1.3071-1.3680 range.  The 1.3480/ 1.3534/ 1.3680/ 1.3725/ 1.3800 levels represent upside resistance targets while the 1.3420/ 1.3302/ 1.3273/ 1.3176/ 1.3057/ 1.2865 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 ¥124.15 level and was supported around the ¥123.10 level.  The pair gained about 40 pips last week.  The Nikkei 225 stock index closed the week at ¥18,188.63. The Japanese government kept its economic assessment unchanged, noting the “economy is recovering.” BoJ boss Fukui said he is neither hawkish nor dovish and added the chances of a rate hike at the 11-12 July meeting are “not necessarily higher than other times.”  Minutes from the May Policy Board meeting reported the BoJ will lift rates gradually.  BoJ’s Muto said inflation expectations may move higher on account of strong GDP growth rate projections. Traders expect an unchanged tankan survey on 2 July. Finance minister Omi verbally intervened to support the yen. Upper house elections will be held on 29 July.

Data released in Japan last week saw May department store sales off 0.4% y/y; large firms’ Q2 business sentiment index printed at -0.9; the May trade surplus was up 9.3% y/y; capital flows saw foreign investors as net buyers of Japanese equities for the seventh consecutive week; and May supermarket sales were off 0.6% y/y.

The Chinese yuan was little-changed vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.6255 in the over-the-counter market, up from CNY 7.6254.  The Chinese government may issue special bonds for foreign exchange purchases. A U.S. Treasury official reported there is no indication that Asian central banks are selling U.S. Treasuries.  A report surfaced suggesting the U.S. Senate may be split on how to proceed with legislation aimed at penalizing countries that manipulate their currencies.  The Senate initiated legislation on Thursday regarding currency manipulation.  A government think-tank sees 2007 CPI growth around 3.3%. China’s new FX reserves manager may open as early as September and may be called China National Investment Corp. PBOC’s Wu warned against the yuan appreciating too quickly.

Data released in China last week saw the entrepreneur confidence index at 83.4% in Q2.

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 147.65-101.30 range and last week’s low (2) was above the 61.8% retracement of the 135.13-101.67 range. Upside resistance targets remain the 124.48/ 125.90/ 127.23/ 129.94 levels while downside support targets remain the 122.59/ 121.40/ 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$ 1.9995 level and was supported around the $1.9750 level.  The pair gained about 225 pips last week.  BoE’s quarterly bulletin reported the public’s inflation expectations may outpace actual inflation.  M&A chatter was cited involving J Sainsbury. Minutes from the June MPC meeting saw a tight 5-4 vote to keep repo at 5.50% and BoE Governor King was in the minority. Short sterling futures are pricing in as much as +75bps of rate hikes by year-end. A +25bps hike in August is probable.  King said inflation pressures are rising because businesses are not hiring enough workers.

Data released in the U.K. last week saw Rightmove June house prices climb +0.8% m/m; the May M4 money supply was up an annualized 13.8%; CML May mortgage lending was the highest level ever for that month; BSA May mortgage approvals fell to ₤4.74 billion from ₤5.45 billion; and the June manufacturers’ order book balance was at +8%.

Technical Outlook

Last week’s high (1) was above the 61.8% retracement of the 2.0131-1.9621 range and last week’s low (2) was just below the 38.2% retracement of the 1.9182-2.0130 range. Upside resistance targets include the 2.0011/ 2.0131 levels while downside support targets include the 1.9876/ 1.9741/ 1.9634/ 1.9548/ 1.9462 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.2285 level and was capped around the CHF 1.2425 level. The pair lost about 120 pips last week.  UBS lifted its Swiss 2007 GDP forecast to 2.6% from 1.8%. The Swiss government lifted its 2007 GDP forecast to 2.3% from 2.0%. The markets are beginning in to price in a +50bps hike by the SNB in September.

Data released in Switzerland last week saw Q1 industrial output up 7.3% y/y; the May trade surplus expanded to CHF 1.3 billion, up 16% y/y; and the June ZEW economic indicator fell to -0.1 from 0.

Technical Outlook

Last week’s high (1) was just below the 76.4% retracement of the 1.2571-1.1993 range and last week’s low (2) was right around the 50.0% retracement of the same range.  Upside resistance targets include the 1.2350/ 1.2521/ 1.2558/ 1.2768 levels while downside support targets include the 1.2214/ 1.2142/ 1.2087 levels.

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0750 level and was supported around the C$ 1.0615 level.  The pair gained about 15 pips last week.  Most traders expect BoC will lift its key overnight rate by +25bps to 4.50% on 10 July.

Data released in Canada last week saw foreign investment of Canadian securities decrease to C$ 1.54 billion in April; Bank of Canada’s core CPI index rose 2.2% y/y in May, down from +2.5% y/y in April; the May leading indicator rose 0.5%; and April retail sales were up 0.4% to C$ 34.05 billion from a revised 1.8% in March and up 4.7% y/y.

Technical Outlook

Last week’s high (1) was below the 38.2% retracement of the 1.1168-1.0548 range and last week’s low (2) was below the 23.6% retracement of the same range.  Upside resistance targets include the 1.0694/ 1.0785/ 1.0849/ 1.0932/ 1.1050/ 1.1110/ 1.1179/ 1.1228 levels while downside support targets include the 1.0575/ 1.0525/ 1.0440 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.8490 level and was supported around the US$ 0.8395 level. The pair gained about 55 pips last week.  RBNZ intervened again by selling the NZ$ early last week.

Data released last week saw the Westpac April leading index up 6.7% y/y; the April leading economic index was up +6.7%; the June skilled vacancies index was off -0.8% m/m;

Technical Outlook

Last week’s high (1) was a multi-decade high and last week’s low (2) was above the 23.6% retracement of the 0.8162-0.8476 range.  Upside resistance targets include the 0.8560/ 0.8620 levels while downside support targets include the 0.8414/ 0.8319/ 0.8288/ 0.8171/ 0.8118/ 0.8034/ 0.7950 levels.

SCHEDULE

Sunday, 24 June 2007

all times GMT

(last release in parentheses)

2301     UK                    Hometrack house prices (0.6% m/m)

2301     UK                    Hometrack house prices (6.7% y/y)

Monday, 25 June 2007

all times GMT

(last release in parentheses)

N/A       Australia           May HIA new home sales (7.1% m/m)

0600     Germany           May import price index (0.9% m/m)

0600     Germany           May import price index (0.5% y/y)

0610     Germany           July GfK consumer confidence (7.3)

1400     US                    May existing home sales (5.99 million)

1400     US                    May existing home sales (-2.6% m/m)

2350     Japan               May corporate service prices (0.1% m/m)

2350     Japan               May corporate service prices (1.1% y/y)

Tuesday, 26 June 2007

all times GMT

(last release in parentheses)

N/A       Spain                European Central Bank member Ordonez speaks

0000     Australia           April leading index (0.5%)

0645     France              May housing starts (-9.5% y/y)

0645     France              May housing permits change (0.1% y/y)

0800     CH                    May UBS consumption indicator (2.346)

0800     Eurozone          April ECB current account

1145     US                    ICSC-UBS retail sales (-0.1%)

1230     Canada             April average weekly earnings (0.4% m/m)

1255     US                    Redbook retail sales (-0.8%)

1300     NZ                    Q2 Westpac NZ consumer confidence (117.7)

1400     US                    Richmond Fed manufacturing index (-10)

1400     US                    May new home sales (981,000)

1400     US                    May new home sales (16.2% m/m)

1400     US                    June consumer confidence (108.0)

1630     US                    Chicago Fed President Moskow speaks

2245     NZ                    May trade balance (-NZ$ 212 million)

2300     Australia           Reserve Bank of Australia Deputy Governor Lowe speaks

2350     Japan               May large retailer’ sales (-1.8%)

2350     Japan               May retail trade (0.3% m/m)

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

Wednesday, 27 June 2007

all times GMT

(last release in parentheses)

0500     Japan               June small business confidence (1.9%)

0645     France              June business confidence (109)

0800     Italy                  May hourly wages (2.5% y/y)

0830     UK                    May BBA mortgage approvals (-13.7%)

0930     CH                    June KOF leading indicator (1.96)

1000     UK                    June CBI distributive trades, expected (23)

1000     UK                    June CBI distributive trades, realized (31)

1100     US                    MBA mortgage applications (-3.4%)

1230     US                    May durable goods orders (0.8%)

1230     US                    May durable goods orders, ex-transportation (1.9%)

1430     US                    EIA crude oil stocks (6.9 million)

1655     US                    Treasury Secretary Paulson speaks

2100     NZ                    May tax receipts

2245     NZ                    Q1 current account balance (-NZ$ 3.929 billion)

2245     NZ                    May building permits (0.7% m/m)

2350     Japan               May industrial production (-0.2% m/m)

2350     Japan               May industrial production (2.2% y/y)

Thursday, 28 June 2007

all times GMT

 (last release in parentheses)

0130     Australia           May job vacancies (-2.3%)

0300     NZ                    June NBNZ business confidence (-48.2)

0300     NZ                    May M3 money supply (14.6% y/y)

0545     CH                    June SECO economic forecasts

0600     UK                    June Nationwide house prices (0.5% m/m)

0600     UK                    June Nationwide house prices (10.3% y/y)

0600     Germany           May ILO unemployment rate (6.4%)

0755     Germany           June unemployment change (3,000)

0755     Germany           June unemployment rate (9.2%)

0800     Eurozone          May M3 money supply (10.4% y/y)

0800     Eurozone          June PMI, retail (48.4)

0815     Eurozone          European Central Bank President Constancio speaks

0900     Italy                  June consumer price index, harmonized (0.4% m/m)

0900     Italy                  June consumer price index, harmonized (1.9% y/y)

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

1230     US                    Q1 GDP, annualized (0.6%)

1230     US                    May GDP price index (4.0%)

1230     US                    Weekly initial jobless claims (324,000)

1230     US                    Continuing jobless claims (2.523 million)

1230     Canada             May industrial product prices (0.2% m/m)

1230     Canada             May raw materials price index (3.3% m/m)

1330     Turkey               European Central Bank member Gonzalez-Paramo speaks

1815     US                    Federal Open Market Committee interest rate decision

2200     France              May unemployment rate (8.2%)

2245     NZ                    Q1 GDP (0.8% q/q)

2330     Japan               May jobless rate (3.8%)

2330     Japan               June PMI, manufacturing (51.4)

2330     Japan               May overall household spending (1.1% y/y)

2330     Japan               June Tokyo consumer price index (0.0% y/y)

2330     Japan               June Tokyo consumer price index, ex-food and energy (-0.2% y/y)

2330     Japan               May national consumer price index (0.0% y/y)

2330     Japan               May national consumer price index, core (-0.2% y/y)

Friday, 29 June 2007

all times GMT

(last release in parentheses)

0130     Australia           May private sector credit change (1.2% m/m)

0500     Japan               May housing starts (-3.6% y/y)

0500     Japan               May annualized housing starts (1.291 million)

0500     Japan               May construction orders (1.80 million)

0500     France              June consumer confidence (-14)

0645     France              Q1 GDP (0.5% q/q)

0645     France              Q1 GDP (2.0% y/y)

0650     France              May producer prices (0.5% m/m)

0650     France              May producer prices (1.9% y/y)

0830     UK                    May M4 money supply (1.2% m/m)

0830     UK                    May M4 money supply (13.8% y/y)

0830     UK                    May M4 sterling lending (₤23.6 billion)

0830     UK                    May net consumer credit (₤500 million)

0830     UK                    May net lending secured on dwellings (₤8.9 billion)

0830     UK                    May mortgage approvals (107,000)

0830     UK                    Q1 total business investment (9.6% y/y)

0830     UK                    Q1 GDP (2.9% y/y)

0830     UK                    Q1 current account (-₤12.7 billion)

0900     Eurozone          June consumer confidence (-1)

0900     Eurozone          June industrial confidence (6)

0900     Eurozone          June economic confidence (111.9)

0900     Eurozone          June services confidence (22)

0900     Eurozone          June business climate indicator (1.53)

0900     Eurozone          June consumer price index, flash (1.9% y/y)

0930     UK                    June GfK consumer confidence (-2)

1230     US                    May personal income (-0.1%)

1230     US                    May personal spending (0.5%)

1230     US                    May personal consumption expenditures, core (0.1% m/m)

1230     US                    May personal consumption expenditures, core (2.0% y/y)

1230     US                    May personal consumption expenditures deflator (2.2% y/y)

1230     Canada             April GDP (0.3% m/m)

1345     US                    June Chicago PMI (61.7)

1400     US                    May construction spending (0.1% m/m)

1400     US                    June University of Michigan consumer sentiment (83.7)

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.