JPY CPI still weak, labor market tightens
EUR, GBP no data
USD Richmond Fed on tap
Traders were dead asleep around the globe as most markets reopened today, with the majors currently less than 10 points away from Fridays closing prices. EUR/USD was bound between 1.3120 and 1.3140 following Fridays precipitous declines on the stronger-than-expected University of Michigan consumer confidence report, while Cable inched along just below resistance at 1.9600. Likewise, USD/JPY held between the narrow 118.80-119.00 range amidst light trading. A major difference, however, was that there was actual data for the yen to trade on.
Sunday evening saw the BSI large manufacturing and large all industry indices ease back to 7.1 and 6.4, respectively, though the figures remained in expansionary territory and signaled continued moderate growth by large businesses. Additionally, capital spending plans remained strong at 8.6% for the year, which should help to fuel the Japanese economy amidst weak consumption as overall household spending posted at -0.7%. The spending figure was an improvement from -2.4%, but with the index still negative for the year, it is clear that consumers need further impetus to spend. Is wage growth the answer? That remains to be seen as the jobless rate narrowed to an 8-year low of 4.0%. It seems that wage growth should be near on the horizon, which could be the force to help drive consumption, however, with part-time job growth outpacing that of full-time job creation, a pick up in payrolls may be hard to come by. Meanwhile, CPI remained tepid, but Bank of Japan Governor Toshihiko Fukui remained mum on the timing of any rate increases, only saying that, They (prices) seem to have been within everybody's expectations. Given the double edged sword of broadly weak consumption and prices, the BOJs MPC may find it far more prudent to hold off on monetary policy tightening until at least March 2007.
In the US today, the Richmond Fed index is on tap. Markets will be looking for a repeat of last weeks dismal Philly Fed survey, especially ahead of PMI data later in the week. Chicago PMI, due out on Thursday, dropped to 49.9 in November, the lowest level since April of 2003 when sentiment was dented by the beginning of the war in Iraq. Expectations are currently set for a reading of 50.0, but if the figure remains in contractionary territory once again this month, traders may go back to considering a hard-landing scenario for the US economy.
