WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
25 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 $1.5815 level and was supported around the $1.5485 level.  The pair gained about 200 pips last week.  Fed Governor Kohn sees core inflation moderating and economic growth firming this year. The FOMC’s minutes said the Fed’s decision to lower rates by 25bps was a “close call” and the Fed now sees GDP growth between 0.3% and 1.2% in 2008. Fed Governor Warsh said the Fed “should resist expected, reflexive calls” to cut rates.

ECB boss Trichet remained hawkish saying policymakers must prevent higher pay deals from igniting inflation.  Buba said the ECB must do more to “anchor long-term inflation expectations.” ZEW head Franz sees the ECB lifting rates “in the near future.”

Data released in the U.S. last week saw the April leading index up 0.1%; April headline PPI was up 0.2% m/m with core inflation up 0.4% m/m and 3.0% y/y; the Chicago Fed April national activity index fell to -1.17 from -0.98 in March; weekly initial jobless claims were off 9,000 to 365,000 with continuing claims steady at 3.073 million; the March housing index was off 0.4% m/m and 3.4% y/y; and April existing home sales were off 1.0% to an annualized 4.89 million units.

Data released in the eurozone last week saw March construction output fall 2.2% m/m and 1.4% y/y; the German May ZEW economic expectations index fell to -41.4; the Belgian May consumer confidence index fell to -9; the German Ifo business climate index rose to 103.5; EMU-15 new industrial orders were off 1.0% m/m and 2.5% y/y; the EMU-15 May PMI services survey fell to 50.6; and the EMU-15 May manufacturing survey fell to 53.5.

Technical Outlook

Last week’s high (1) was above the 61.8% retracement of the 1.6018-1.5283 range and last week’s low (2) was above the 23.6% retracement of the same range.  The 1.5854/ 1.5903/ 1.6072 levels represent upside resistance targets while the 1.5737/ 1.5650/ 1.5563/ 1.5456/ 1.5393 levels represent downside support targets.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥102.70 level and was capped around the ¥104.70 level.  The pair lost about 80 pips last week. The Nikkei 225 stock index gained 0.24% on Friday to close at ¥14,012.20.  Bank of Japan’s Policy Board kept the overnight call rate unchanged at 0.50% and reported the economy is slower “due to the effects of high energy and materials prices” but kept its domestic economic assessment unchanged. BoJ Governor Shirakawa said an economic slowdown “is becoming more evident.” The government kept its economic assessment “unchanged” and said the economic recovery is “pausing.” Shirakawa is “not ruling out any policy options.”

Data released in Japan this week saw April department store sales off 3.4% y/y; April convenience store sales fell 0.2% y/y; the March leading index was downwardly revised to 18.2 with the coincident index lower at 30.0; April supermarket sales were off 0.8%; the April merchandise trade surplus fell 46.3% y/y; and the March all-industries index rose 0.5%.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.9417 in the over-the-counter market, down from CNY 6.9900. 

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 114.65-95.71 range and last week’s low (2) was below the 23.6% retracement of the same range. Upside resistance targets remain the 105.18/ 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$ 1.9850 level and was supported around the $1.9450 level.  The pair gained about 250 pips last week.  RICS sees U.K. house prices off up to 40% this year.  BoE Deputy Governor Lomax is resigning next month. MPC officials voted 8-1 in May to keep rates steady with Blanchflower seeking a 25bps easing. BoE’s agents’ summary of business conditions foresaw a weakening economy.

Data released in the U.K. last week saw Rightmove May house prices up 1.2%; Lloyds TSB optimism survey reached all-time lows; CML April gross mortgage lending was up m/m; April public sector net borrowing had a surplus of ₤500 million; the April M4 money supply was up 11.2% y/y; April retail sales were off 0.2% m/m and up 4.2% y/y; CBI industrial activity weakened in May; and Q1 GDP was unrevised at 0.4% q/q and an annualized 2.5%.

Technical Outlook

Last week’s high (1) was above the 38.2% retracement of the 1.7060-2.1159 range and last week’s low (2) was above the 50.0% retracement of the same range.  Upside resistance targets include the 1.9866/ 1.9991? 2.0033/ 2.0248 levels while downside support targets include the 1.9602/ 1.9395/ 1.9336/ 1.9117/ 1.8631 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.0230 level and was capped around the CHF 1.0570 level. The pair lost about 235 pips last week.  SNB’s Hildebrand said regulations for Swiss banks may need to tighten.  SNB President Roth “vehemently supports the banking commission’s initiative for higher capital and liquidity requirements.”

Data released in Switzerland last week saw March producer and import prices up 0.7% m/m and 3.6% y/y and the ZEW Nat economic expectations indicator improved to -60.4.

Technical Outlook

Last week’s high (1) was below the 50.0% retracement of the 1.1594-0.9647 range and last week’s low (2) was below the 38.2% retracement of the same range.  Upside resistance targets include the 1.0391/ 1.0620/ 1.0850/ 1.1134 levels while downside support targets include the 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$ 0.9820 level and was capped around the C$ 1.0000 figure.  The pair lost about 120 pips last week.

Data released in Canada last week saw March wholesale sales up 0.6%; March net portfolio inflows totaled C$ 8.63 billion; April leading indicators were up 0.1% m/m; April consumer price inflation was up 1.7% y/y; BoC’s core inflation index was up 1.5% y/y; and March retail sales were up 0.1% m/m and unchanged ex-autos.

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$ 0.9655 level and was supported around the US$ 0.9510 level.  The pair gained about 60 pips last week. Minutes from RBA’s policy deliberations confirmed policymakers discussed hiking rates for a “considerable time.”

Data released in Australia last week saw Westpac May consumer sentiment rose 2.7% m/m.

Technical Outlook

Last week’s high (1) was a new multi-decade high and last week’s low (2) was above the 23.6% retracement of the 0.8511-0.9653 range.  Upside resistance targets include the 0.9648/ 0.9920/ 1.0053 levels while downside support targets include the 0.9487/ 0.9312/ 0.9263/ 0.9120/ 0.9003/ 0.8887 levels.

SCHEDULE

Sunday, 25 May 2008

all times GMT

(last release in parentheses)

1430     US                    Treasury Secretary Paulson speaks

2245     NZ                    April trade balance (-NZ$ 50.0 million)

Monday, 26 May 2008

all times GMT

(last release in parentheses)

N/A       US                    Financial markets closed

0300     Japan                Treasury official Lowery speaks

1700     Portugal            European Central Bank member Constancio speaks

2350     Japan                April corporate service price index (0.4% y/y)

Tuesday, 27 May 2008

all times GMT

(last release in parentheses)

0200     NZ                    Q2 RBNZ two-year inflation expectations (2.7%)

0600     Germany           Q1 GDP (0.3% q/q)

0600     Germany           Q1 GDP (1.8% y/y)

0610     Germany           June GfK consumer confidence (5.9)

0645     France              April housing starts (-9.9%)

0645     France              April housing permits

0730     Italy                  May business confidence (86.9)

0800     Italy                  April hourly wages (0.0% m/m)

0800     Italy                  April hourly wages (2.8% y/y)

0800     CH                    April UBS consumption indicator (2.289)

0830     UK                    April BBA house purchase loans

0915     Austria              European Central Bank member Liebscher speaks

1300     US                    March Case Shiller home price index

1400     US                    May consumer confidence (62.3)

1400     US                    April new home sales (526,000)

1400     US                    April new home sales (-8.5%)

1400     US                    May Richmond Fed manufacturing index (0.0)

1550     US                    San Francisco Fed President Yellen speaks

Wednesday, 28 May 2008

all times GMT

(last release in parentheses)

0030     Australia           March Westpac leading index (0.0%)

0100     Australia           May DEWR skilled vacancies (-0.8% m/m)

0400     US                    Minneapolis Fed President Stern speaks

0500     Japan                May small business confidence (43.1)

0645     France              May consumer confidence (-37.0)

0730     Eurozone          European Union member Alumnia speaks

0730     Italy                  May retail confidence (106.2)

0730     Italy                  May services survey

0800     Eurozone          March current account (€4.3 billion)

1100     US                    MBA mortgage applications

1230     US                    April durable goods orders (-0.3%)

1230     US                    April durable goods orders, ex-transportation (1.5%)

2350     Japan                April retail trade (0.5% m/m)

2350     Japan                April retail trade (1.1% y/y)

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                April large retailers’ sales (0.2%)

Thursday, 29 May 2008

all times GMT

(last release in parentheses)

0100     US                    Dallas Fed President Fisher speaks

0130     Australia           Q1 private capital expenditures (5.1%)

0300     NZ                    May NBNZ business confidence (-54.8)

0300     NZ                    April M3 money supply (6.4% y/y)

0300     Japan                Bank of Japan Policy Board member Kamezaki speaks

0600     Germany           April ILO unemployment rate (7.3%)

0715     CH                    Q1 employment level (3.883 million)

0715     CH                    Q1 employment level (2.7% y/y)

0755     Germany           May unemployment rate (7.9%)

0755     Germany           May unemployment change (-7,000)

0800     Italy                  May PMI, retail (31.4)

0800     France              May PMI, retail (46.2)

0800     Germany           May PMI, retail (41.8)

0800     Eurozone          April M3 money supply (10.3% y/y)

1000     UK                    May CBI distributive trades

1230     US                    Q1 GDP (0.6% q/q)

1230     US                    Q1 GDP (2.6% annualized)

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

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1300     US                    New York Federal Reserve President Geithner speaks

1230     Canada             Q1 current account (-C$ 500 million)

2200     Germany           European Central Bank member Weber speaks

2215     US                    Federal Reserve Vice Chairman Kohn speaks

2245     NZ                    April building permits (-9.1% m/m)

2301     UK                    May GfK consumer confidence survey (-24.0)

2315     Japan                May PMI, manufacturing (48.6)

2330     Japan                April jobless rate (3.8%)

2330     Japan                April household spending (-1.6%)

2330     Japan                May Tokyo-area CPI (0.6% y/y)

2330     Japan                May Tokyo-area CPI, ex-fresh food (0.7% y/y)

2330     Japan                May Tokyo-area CPI, ex-food and energy (0.0% y/y)

2330     Japan                April CPI, nationwide (1.2% y/y)

2330     Japan                April nationwide CPI, ex-fresh food (1.2% y/y)

2330     Japan                April nationwide CPI, ex-food and energy (0.1% y/y)

2350     Japan                April industrial production (-3.4% m/m)

2350     Japan                April industrial production (-0.7% y/y)

Friday, 30 May 2008

all times GMT

(last release in parentheses)

N/A       Germany           April retail sales (-0.1% m/m)

N/A       Germany           April retail sales (-6.3% y/y)

0130     Australia           April private sector credit (0.8% m/m)

0130     Australia           April private sector credit (14.9% y/y)

0500     Japan                April housing starts (-15.6%)

0500     Japan                April annualized housing starts (1.088 million)

0500     Japan                April construction orders (6.4% y/y)

0645     France              April producer prices (0.5% m/m)

0645     France              April producer prices (5.2% y/y)

0800     Italy                  April producer price index (0.8% m/m)

0800     Italy                  April producer price index (6.3% y/y)

0900     Italy                  May CPI, harmonized

0900     Eurozone          May CPI, flash (3.3%)

0900     Eurozone          April unemployment rate (7.1%)

0900     Eurozone          May business climate indicator (0.44)

0900     Eurozone          May consumer confidence (-12.0)

0900     Eurozone          May economic confidence (97.1)

0900     Eurozone          May industrial confidence (-2.0)

0900     Eurozone          May services confidence (7.0)

0930     CH                    May KOF leading indicator (1.2)

1230     US                    April PCE deflator (3.2% y/y)

1230     US                    April PCE, core (0.2% m/m)

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

1230     US                    April personal income (0.3%)

1230     US                    April personals pending (0.4%)

1230     Canada             April industrial product prices (1.7%)

1230     Canada             April raw materials price index (6.6% m/m)

1230     Canada             April raw materials price index (6.6% m/m)

1230     Canada             March GDP (-0.2% m/m)

1230     Canada             Q1 GDP, annualized (0.8%)

1345     US                    May Chicago PMI (48.3)

1400     US                    May University of Michigan consumer sentiment (59.5)

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.