JPY All Industry in line with estimates
EZ French Consumer spending rebounds
BOE minutes reveal 7-2 vote but hawkish bias
CAD CPI on tap expected hotter
USD U of M expected slightly better
Note: No Brief 11/23/06 Happy Thanksgiving
Dollar weakness continued is Asia and European trade today in the wake of White House announcement that growth estimates for both 2006 and 2007 would be pared down. The Bush administration curtailed its projections for 2006 from 3.6% to 3.1% while 2007 estimates were revised downward from 3.3% to 2.9%. Acknowledging the slowdown in housing, Edward Lazear chairman of the White House Council of Economic Advisors stated, The housing market, as you know, it has been hit, I think, harder than most of us had expected. The news resuscitated dollar bears arguments of a US slowdown and took focus away from the much anticipated strong start to the US Christmas shopping season.
Yen was the biggest beneficiary of this news, as the unit ignored its own lackluster data gaining 70 points from yesterdays New York close. With US growth anticipated to slow the interest rate differential between the two currencies may now contract, prompting many traders to bail out of their carry trade positions ahead of the Thanksgiving holiday in both countries.
The EUR/USD was also boosted today by supportive eco data from the Euro-zone where French Consumer spending showed a nice rebound in October to 0.9% gain from a -2.7% decline the month prior. The news bodes well for Q4 GDP numbers and suggests that the anemic Q3 results released yesterday were a one off result driven primarily by temporary dampening effects of rising energy costs. EZ Industrial orders also proved to be an upside surprise, retreating less than expected at -1.3% vs. -2.4% projected.
With the EUR/USD now within striking distance of its long term resistance at 1.2900 further progress may be limited unless of U of M data prints materially worse than expected stoking speculation that the US consumer spending may in fact be weaker this Christmas season.
