Economic Calendar for week 2th January 2008 - 4th January 2008

Wednesday Jan 2nd:

GE - 08:55 - Manufacturing PMI.
EU - 15:00 - Manufacturing PMI.
UK - 09:30 - Manufacturing PMI.
US - 15:00 - ISM Manufacturing Index.
US - 15:00 - ISM Manufacturing Prices.
US - 15:00 - Construction Spending M/M.
US - 19:00 - FOMC Meeting Minutes.

Thursday Jan 3rd:

GE - 08:55 - Unemployment Rate.
EU - 09:00 - M3 Money Supply Y/Y.
UK - 09:30 - Construction PMI.
US - 13:30 - ADP Nonfarm Employment Change.
US - 13:30 - Unemployment Claims.
US - 15:00 - Factory Orders M/M.
US - 15:30 - Crude Oil Inventories.

Friday Jan 4th:

GE - 08:55 - Services PMI.
EU - 09:00 - Services PMI.
UK - 09:30 - Services PMI.
UK - 09:30 - M4 Money Supply M/M.
UK - 09:30 - Net Lending to Individuals M/M.
UK - 09:30 - Mortgage Approvals M/M.
EU - 10:00 - CPI Y/Y.
US - 13:30 - Nonfarm Employment Change.
US - 13:30 - Unemployment Rate.
US - 13:30 - Average Hourly Earnings M/M.
US - 13:30 - ISM Non-Manufacturing Index & Prices.
US - 16:15 - Fed Governor Kohn Speaks.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Last week, global equity markets mostly finished flat with a negative tinge going into the final trading day of 2007. In contrast, there were significant movements on the major currency pairs. The Dollar was under pressure across the board as Sterling recovered strongly from losses earlier in the week and the Euro had another good week against the Dollar.

The US Dollar wasnt the only unwanted item over the Christmas week as the Pound fell to fresh lows against the Euro. The fall came on the back of last weeks heavy selling, pushing the pair further towards the psychologically important 0.75 level. Using synthetic levels based on previous Deutsche Mark data, the rate may still have some way to go with the synthetic pair touching 0.90 in 1995.

The Euro benefited from a flight to safety last week on renewed concerns for global security following the assassination of former Pakistan president Benazir Bhutto. Pakistan is a key US ally in the war against terror, therefore the countrys internal struggles have a significant impact on the global stage.

The Euro, Gold, US treasuries and the Swiss Franc were all in demand as investors sought safe havens. Oil was also in play after last weeks data showed US reserves were less than expected.

UK house prices displayed further signs of weakness, dropping in consecutive months for the first time in seven years. According to the Nationwide Building Society, UK house prices dropped in both December and November, representing the first month on month fall in average prices since August 2000. The Quarterly rate of growth also fell from 1.4% to 0.9%.

In a reminder of how quickly sentiment can change, Case-Schiller Median house price data showed that the US housing market is continuing its dramatic reversal. Octobers data showed that all 20 cities tracked were down on a month-to-month basis. The 10 city index showed a 6.7% year on year decline, the worst fall in the indexs history.

The FTs Lex column recently highlighted an International Monetary Fund study that found that house price busts though less frequent tend to last twice as long as equity market busts (5 rather than 2 years), and are associated with capital losses twice as large (8% of GDP).

Next week there is little respite from the house price merry go round with US existing home sales data on Monday and the release of the last FOMC meeting minutes on Wednesday. The next meeting at the end of January is expected to produce another quarter point cut, but this still isnt a done deal according to analysts.
Other top tier announcements next week include US Non Farm Employment data and the Unemployment rate on Friday. Both of these could have a significant impact on equity and currency markets in the first week of the new year.

Given the uncertainty over the US housing market and the possibility that there may be a few more years in the property bear market, a trade on the US dollar could be profitable. Given its supposed safe haven status, the Swiss Franc could continue to strengthen against the US Dollar and recover some of the ground lost in November. A Long term No Touch trade on the USD/ CHF (Swiss Franc) not to touch 1.236 over the next 180 days returns 10%.

David Evans