WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
18 May 2008

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 $1.5600 figure and was supported around the $1.5365 level.  The pair gained about 100 pips last week.  Chicago Fed’s Evans sees the economy at a “relatively sluggish pace.”  WSJ reported the U.S. has taken the lead within the G7 of promoting a strong dollar.  Bernanke said financial market conditions are still “far from normal.” November fed funds futures are pricing in about a 40% chance of a +25bps increase in the fed funds target rate. Richmond Fed’s Lacker remained hawkish.  San Francisco Fed President Yellen said recent inflation data have been “disappointing” and it could erode the Fed’s credibility. Greenspan sees house prices bottoming out by early 2009.

ECB’s Gonzalez-Paramo said liquidity operations have reduced financial market volatility. ECB’s Noyer said countries’ ongoing link to the U.S. dollar is imparting inflation. ECB’s Trichet said policymakers must “preserve the firm anchoring of inflation expectations” and remain “extraordinarily attentive.” French finance minister Lagarde said the markets “better understood” the G7’s statement about exchange rates.  Eurogroup’s Juncker said the euro’s decline has been welcomed. Germany’s DIW lifted its Q2 GDP forecast.

Data released in the U.S. last week saw April import prices up +1.8% m/m and +15.4% y/y; April retail sales were off 0.2% with ex-autos up +0.5%; April headline CPI was up 0.2% m/m and 3.9% y/y with the core reading up 0.1% m/m and 2.3% y/y; April foreclosures were up 64% y/y; net long-term TIC flows rose to US$ 80.4 billion with monthly net TIC flows at –US$ 48.2 billion; the New York State Empire manufacturing index fell to -3.23; weekly initial jobless claims rose 6,000 to 371,000 with continuing jobless claims up 28,000 to 3.06 million; April industrial production fell 0.7% with capacity utilization at 79.7%; the Philadelphia Fed May business index improved to -15.7; April housing starts were up 8.2% and April building permits were up 4.9%; and the mid-May University of Michigan consumer sentiment fell to 59.5 from 62.6 in April.

Data released in the eurozone last week saw EMU-15 industrial output was off 0.2% m/m and up 2.0% y/y; German GDP grew 1.5% q/q in Q1; EMU-15 GDP was up 0.7% q/q in Q1; final German April CPI was off 0.2% m/m and up 2.4% y/y; EMU-15 provisional inflation was up 3.3% y/y; and the EMU-15 trade balance printed at -€2.3 billion in March.

Technical Outlook

Last week’s high (1) was just below the 23.6% retracement of the 1.4309-1.6018 range and last week’s low (2) was right around the 38.2% retracement of the same range.  The 1.5615/ 1.5854/ 1.5903/ 1.6072 levels represent upside resistance targets while the 1.5393/ 1.5219/ 1.5164/ 1.5069/ 1.4979 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 ¥105.40 level and was supported around the ¥102.55 level.  The pair gained about 105 pips last week. The Nikkei 225 stock index lost 0.23% on Friday to close at ¥14,219.48.  BoJ Governor Shirakawa said rates need to move higher but reiterated downside economic risks persist.

Data released in Japan this week saw the economy watchers’ index decline for the first time in three months; April bank lending was up +1.3%; the April corporate goods price index rose 3.7%; Japan’s current account surplus fell 12.3% y/y with the trade surplus off 29.0% y/y; core private sector machinery orders were off 8.3% m/m; April consumer confidence fell to 35.2; Q1 GDP was up 0.8% q/q and an annualized 3.3%; and March revised industrial output was off 3.4% m/m.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9900 in the over-the-counter market, down from CNY 6.9918.  PBoC lifted reserve requirements by 50bps effective 20 May. PBoC’s quarterly monetary policy report foresaw a tighter monetary policy.  PBoC’s Su Ning doesn’t see runaway inflation in China.

Data released in China last week saw April wholesale sales up 10.3% y/y with April retail sales up 22.0% y/y; the M2 money supply was up 16.94% y/y; industrial value-added output was up 16.3% between January and April; urban fixed-asset investment was up 25.7% y/y; and the April properly climate index was up 1.42% y/y.

Technical Outlook

Last week’s high (1) was right around the 50.0% retracement of the 114.65-95.71 range and last week’s low (2) was below the 38.2% retracement of the same range. Upside resistance targets remain the 106.77/ 107.41/ 108.63 levels while downside support targets remain the 102.42/ 100.18/ 98.00/ 95.04/ 94.41 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 1.9630 level and was supported around the $1.9365 level.  The pair gained about 20 pips last week.  BoE’s quarterly inflation report warned CPI could reach 3.6% this year and its base scenario does not rule out CPI at or above 4.0%. BoE Governor King said the U.K. may experience an “odd quarter or two” of negative economic growth and said the MPC is “facing its biggest challenge yet.” Chancellor Darling announced a ₤2.7 billion tax cut. Banks may swap as much as ₤90 billion in mortgage-backed securities.

Data released in the U.K. last week saw U.K. producer input prices rose 2.4% and an annualized 23.0% gain; April output PPI was up 7.5% y/y; the March trade balance improved to -₤7.4 billion; April CPI was up +0.8% m/m and 3.0% y/y; RICS house prices fell in the three months to April; BRC April retail sales declined; DCLG March annual house price inflation growth slowed to 5.2%; CML March mortgage lending remained subdued; the April claimant count of unemployment was up 7,200; and Q1 home construction was off an annualized 24%.

Technical Outlook

Last week’s high (1) was above the 76.4% retracement of the 1.9336-2.0395 range and last week’s low (2) was right around the 23.6% retracement of the 1.7060-2.1159 range.  Upside resistance targets include the 1.9586/ 1.9741/ 1.9866/ 1.9991 levels while downside support targets include the 1.9336/ 1.9117/ 1.8631 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.0600 figure and was supported around the CHF 1.0405 level. The pair gained about 45 pips last week. 

Data released in Switzerland last week saw SECO April consumer sentiment off to +2 from +14 while March retail sales were off 2.5% y/y.

Technical Outlook

Last week’s high (1) was right around the 50.0% retracement of the 1.1594-0.9647 range and last week’s low (2) was right around the 38.2% retracement of the same range.  Upside resistance targets include the 1.0620/ 1.0850/ 1.1134 levels while downside support targets include the 1.0391/ 1.0106/ 0.9647/ 0.9605/ 0.9535 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9940 level and was capped around the C$ 1.0105 level.  The pair lost about 50 pips last week.

Data released in Canada last week saw the March new housing price index rise 0.2% m/m and 6.1% y/y while March manufacturing shipments were off 1.6% m/m.

Technical Outlook

Last week’s high (1) was below the 61.8% retracement of the 1.0378-0.9709 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 1.0074/ 1.0220/ 1.0378/ 1.0462 levels while downside support targets include the 0.9965/ 0.9867/ 0.9752 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9560 level and was supported around the US$ 0.9290 level.  The pair gained about 100 pips last week.

Data released in Australia last week saw March housing finance fall 6.1% m/m; NAB April business confidence fell 4 points; and the Q1 wage cost index up was up 0.9% q/q.

Technical Outlook

Last week’s high (1) was near a lifetime high and last week’s low (2) was just below the 23.6% retracement of the 0.8511-0.9559 range.  Upside resistance targets include the 0.9582/ 0.9648/ 0.9920 levels while downside support targets include the 0.9312/ 0.9263/ 0.9120/ 0.9003/ 0.8887 levels.

SCHEDULE

Sunday, 18 May 2008

all times GMT

(last release in parentheses)

2301     UK                    May Rightmove house prices (-0.1% m/m)

2301     UK                    May Rightmove house prices (1.3% y/y)

Monday, 19 May 2008

all times GMT

(last release in parentheses)

N/A       Japan                Bank of Japan Policy Board interest rate decision

0000     NZ                    April performance of services index

0130     Australia           April balance of payments imports (1.0% m/m)

0530     Japan                April Tokyo department store sales (-0.7% y/y)

0530     Japan                April nationwide department sales (-1.2% y/y)

0630     France              April Bank of France business sentiment (105.0)

0900     Eurozone          March construction output (1.2% m/m)

0900     Eurozone          March construction output (4.3% y/y)

1400     US                    April leading indicators (0.1%0

2350     Japan                March tertiary industry index (-1.7% m/m)

Tuesday, 20 May 2008

all times GMT

(last release in parentheses)

0130     Australia           Reserve Bank of Australia May board meeting minutes

0500     Japan                March coincident index (33.3%)

0500     Japan                March leading economic index (20.0%)

0600     Japan                Bank of Japan monthly report

0600     Germany           April producer prices (0.7% m/m)

0600     Germany           April producer prices (4.2% y/y)

0700     Japan                April convenience store sales (-0.6% y/y)

0715     CH                    April producer and import prices (0.6% m/m)

0715     CH                    April producer and import prices (3.9% y/y)

0800     Italy                  March industrial orders (2.0% m/m)

0800     Italy                  March industrial orders (14.3% y/y)

0800     Italy                  March industrial sales (0.8% m/m)

0800     Italy                  March industrial sales (9.0% y/y)

0900     Germany           May ZEW survey, current situation (33.2)

0900     Germany           May ZEW survey, economic sentiment (-40.7)

0900     Eurozone          May ZEW survey, economic sentiment (-44.8)

1230     US                    April producer price index (1.1% m/m)

1230     US                    April producer price index (6.9% y/y)

1230     US                    April producer price index, ex-food and energy (0.2% m/m)

1230     US                    April producer price index, ex-food and energy (2.7% y/y)

1230     Canada             March international securities transactions

1230     Canada             March wholesale sales (-1.8% m/m)

1300     US                    Federal Reserve Vice Chairman Kohn speaks

1700     Eurozone          European Union’s Alumnia speaks

Wednesday, 21 May 2008

all times GMT

(last release in parentheses)

0030     Australia           May Westpac consumer confidence (-1.3%)

0300     NZ                    April credit card spending (3.5% y/y)

0800     Germany           May Ifo, business climate (102.4)

0800     Germany           May Ifo, current assessment (108.4)

0800     Germany           May Ifo, expectations (96.8)

0830     UK                    Bank of England Monetary Policy Committee meeting minutes

0830     UK                    April public sector net cash requirements (₤12.7 billion)

0830     UK                    April public sector net borrowing (₤10.2 billion)

0830     UK                    April M4 money supply (0.8% m/m)

0830     UK                    April M4 money supply (11.9% y/y)

0830     UK                    April M4 sterling lending (₤17.4 billion)

0900     CH                    May ZEW survey, expectations (-71.4)

1100     US                    MBA mortgage applications (2.9%)

1100     Canada             April consumer price index (0.4% m/m)

1100     Canada             April consumer price index (1.4% y/y)

1100     Canada             April consumer price index, core (0.2% m/m)

1100     Canada             April consumer price index, core (1.3% y/y)

1230     Canada             April leading indicators (0.0% m/m)

1800     US                    Federal Open Market Committee meeting minutes

2350     Japan                April merchandise trade balance (¥1.11 trillion)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                March all-industry activity index (-1.4% m/m)

Thursday, 22 May 2008

all times GMT

(last release in parentheses)

N/A       Japan                May monthly economic report

0100     Australia           May consumer inflation expectations (4.3%)

0200     NZ                    Finance minister Cullen delivers 2008 budget

0500     Japan                April supermarket sales (1.4% y/y)

0700     Germany           European Central Bank member Weber speaks

0730     Italy                  May consumer confidence (99.8)

0800     Italy                  March retail sales (0.3% m/m)

0800     Italy                  March retail sales (2.7 y/y)

0830     UK                    April retail sales (-0.4% m/m)

0830     UK                    April retail sales (4.6% y/y)

0830     UK                    Q1 total business investment (1.8% q/q)

0830     UK                    Q1 total business investment (1.7% y/y)

0900     Eurozone          March industrial new orders (0.6% m/m)

0900     Eurozone          March industrial new orders (9.9% y/y)

1000     UK                    May CBI monthly industrial trends

1230     US                    Weekly initial jobless claims (371,000)

1230     US                    Continuing jobless claims (3.060 million)

1230     Canada             March retail sales (-0.7% m/m)

1230     Canada             March retail sales, ex-autos (-0.3% m/m)

1315     US                    Federal Reserve Governor Kroszner speaks

1400     US                    March house price index (0.6% m/m)

1400     US                    Q1 house price index (0.1% q/q)

2350     Japan                Bank of Japan Policy Board meeting minutes (8-9 April)

Friday, 23 May 2008

all times GMT

(last release in parentheses)

0615     CH                    April trade balance (CHF 1.25 billion)

0645     France              April consumer spending (-1.7% m/m)

0645     France              April consumer spending (1.2% y/y)

0700     France              May PMI, manufacturing (51.1)

0700     France              May PMI, services (52.8)

0730     Germany           May PMI, manufacturing (53.6)

0730     Germany           May PMI, services (54.9)

0800     Italy                  April trade balance

0800     Italy                  Q1 2007 and Q1 2008 GDP

0800     Eurozone          May PMI, manufacturing (50.7)

0800     Eurozone          May PMI, services (52.0)

0830     UK                    Q1 GDP (0.4% q/q)

0830     UK                    Q1 GDP (2.5% y/y)

1400     US                    April existing home sales (4.93 million)

1400     US                    April existing home sales (-2.0% m/m)

1430     Canada             April money supply       

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