JPY Tertiary slightly weaker but Department Store Sales jump
UK RPI stays hit at 0.5% m/m
EUR ZEW drops to 13 year low
PPI and TICS on tap
The ZEW survey once again surprised to the downside printing at -27.4 versus -20.4 expected as investors continued to be concerned about the impact of the increase in German Value Added Tax due to go into effect at the start of next year. The currency markets however ignored the dour ZEW readings which now stand at a 13 year low. The ZEW results have been consistently wrong this year relentlessly trending down while EZ growth gathered strength throughout 2006. The euro was also supported in tonights trade by better than expected EZ Industrial Production readings which jumped 5.4% on a year over year basis. For the time being it appears that the growth generated by the export sector of the Euro-zone economy will offset any depressive effects of higher consumer taxes.
Meanwhile across the pond, UK inflation gauges rose more than anticipated as RPI which is the key inflation measure used in wage negotiations jumped 0.5% on month over month basis and registered a substantial 3.6% gain on year over year comparison. The news persuaded the market that the BOE will try to preempt any inflationary flare-ups will most likely tighten rates at its November meeting to 5% from 4.75% current level. As a result the GBP/USD reached a one week high hitting 1.8682 in early London trade.
In US today the economic data may well set the tone for EUR/USD trading for the rest of the week as both PPI and TICs data are scheduled to be released within one half hour of each other. PPI is expected to rebound from the month prior but with oil prices still below $60 cost pressures should be moderate. On the other hand the TICS report could be critical to the strength of the greenback in the near term. If the number once again woefully misses like it did last month currency markets will become increasingly more worried about the ability of US to finance its massive Current Account and Trade deficits and the EUR/USD will have trouble moving beyond 1.2500 level.
