NZD Import prices outpace exports
JPY Consumer confidence remains pessimistic
GBP House prices slip, PPI input rises
USD Wholesale sales on tap
Traders during the Tokyo session aggressively pulled the dollar lower against the euro and pound, propelling EUR/USD up to a high of 1.3224 and GBP/USD to 1.9570. However, the beginning of the early European session saw the respective pairs easing back towards Fridays closing prices. Meanwhile, USD/JPY gradually strengthened to probe the 117.00 level on cross flows from EUR/JPY, which hit fresh highs of 154.35. The picture looks to get progressively cloudier throughout the day and early tomorrow ahead of the US FOMC meeting on Tuesday and relatively light data on the calendar.
The UKs economic calendar was booked solid today, as signs emerged that the housing sector may finally be slowing following two rate hikes in the second half of this year. Rightmove house prices for December slipped 0.3% for the month of December. However, the annual rate still managed to accelerate to 13.0% - a two year high which should continue to help fuel economic growth in the UK. In other price data, PPI input and output prices indicated that producers may be feeling a squeeze on profit margins as input prices rise faster than output prices. Additionally, though petroleum products are contributing negatively to the figures, the Bank of England will likely remained concerned about second round effects from previous oil price increases. Nevertheless, the BOE is widely expected to stay on hold at 5.00% well into 2007. An interesting factor for GBP/USD traders to consider, however, is when or if the US FOMC decides to cut rates, as the monetary policy action would put interest rates in the respective countries at parity. Markets will get a glimpse into the timing on Tuesday, when the Fed is widely expected to stay neutral for December at 5.25%, but will have the opportunity to prepare the markets for their bias on more accommodative policy.
