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FX Day Trading - 15 July 2010
UK unemployment down again
Because more folk have part-time jobs
Mortgage equity repayment figures this morning
The breakup of Tiger Woods's marriage has obviously been more acrimonious than we imagined. Although he put a brave face on it at yesterday's press conference, claiming the new one would be better in driving rain and a howling gale, it was clear from his expression that Tiger was gutted at having lost custody of his putter.
Even more devastated will have been the 22,000 people reported in yesterday's UK employment report as having lost their jobs. The overall tone of the report was positive, with 160,000 more earners and a fall in the unemployment rate from 8.0% to 7.8% but the details were unnerving.
Most of the increase - 117,000 - was again the result of part-time hirings. The number of self-employed rose by 59,000: whilst this would be an optimistic sign in a booming economy it smacks of desperation in times of austerity. Nevertheless, the market was happy to see the headline numbers moving in the right direction and investors' first reaction was to buy the pound.
Figures released in Brussels half an hour later were vaguely unhelpful to the euro but did no lasting damage. Finalised euro zone inflation in June was on target at 1.4% in June, down from 1.6% in May with prices unchanged on the month.
Industrial production in May fell short of forecast, increasing by just 0.9% and pulling the annual growth down from 9.6% to 9.4%. Equally unhelpful - though also not particularly damaging - to the euro was an announcement from the Bank of Spain about the country's commercial banks. Apparently they have soaked up more than a quarter of all the money lent by the ECB to the euro zone banking sector. It's a worry.
US retail sales continued to struggle in June. The -0.5% monthly decline was more gentle than May's -1.1% but was still another warning sign for the US economy.
The dollar took a brief step backwards on the news but that was quickly corrected. There was similarly little reaction to the minutes of the Federal Open Market Committee's June meeting. The FOMC, like the Bank of England's Monetary Policy Committee, has its token contrarian. Thomas Hoenig performs the same function as the MPC's Andrew Sentance, warning that for a central bank to dangle the prospect of low interest rates forever sends the wrong signal. As usual, Mr Hoenig voted against the FOMC's decision to say once again in its statement that 'financial conditions were likely to warrant "exceptionally low levels of the federal funds rate for an extended period".'
Continuing the pattern of couldn't-care-less was the New Zealand dollar, which failed to draw any fresh support from an improvement in the Business NZ purchasing managers' index from 54 to 56.2. As one of the vanishingly few countries to register a PMI improvement this month the Kiwi might have expected better. Australian consumer inflation expectations were slightly lower, at 3.3% instead of 3.4%, and motor vehicle sales were down by -1.2% in June, halving the annual rate of increase to 8.2%. The Bank of Japan left its policy interest rate at 0.1%.
And there is yet more excitement in store.
In Europe, this morning brings the ECB's monthly report and ZEW's survey of Swiss business expectations. After lunch there is the Canadian manufacturing shipment and motor vehicle sales figures to look forward to, as well as a bunch of US statistics. The New York and Philadelphia Federal Reserve Banks publish the monthly surveys of manufacturing activity in their districts. Jobless claims should be slightly fewer on the week. Producer prices ought to be rising more slowly and industrial production is reckoned to have been flat in June.
The only UK statistic is the one for (net) housing equity withdrawal. For well over a year this figure has been negative. On average, people have stopped leveraging the rising value of their house to buy posh motors or holidays of a lifetime. They have been taking advantage of low interest rates to reduce the outstanding balance on their mortgage with monthly overpayments. It may be prudent housekeeping but it is not the sort of behaviour to get the economy going.
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'FX Day Trading 15 Jul 2010', Article by Moneycorp, last update: 15-Jul-10
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