PLEASE NOTE - All times GMT
Monday Nov 5th:
UK - 08:30 - Industrial Production M/M.
UK - 08:30 - Manufacturing Production M/M.
UK - 08:30 - Services PMI.
EU - 08:30 - Sentix Investor Confidence.
US - 14:00 - ISM Non-Manufacturing Index & Prices.
UK - 23:01 - BRC Retail Sales Monitor Y/Y.
UK - 23:01 - NIESR GDP Estimate.
Tuesday Nov 6th:
GE - 07:55 - Services PMI.
EU - 08:00 - Services PMI.
EU - 09:00 - Retail Sales M/M.
EU - 09:00 - PPI M/M.
GE - 10:00 - Factory Orders M/M.
UK - 23:01 - Consumer Confidence Index.
Wednesday Nov 7th:
UK - 09:30 - BRC Shop Price Index Y/Y.
GE - 10:00 - Industrial Production M/M.
US - 12:30 - Nonfarm Productivity Q/Q.
US - 12:30 - Unit Labor Costs Q/Q.
US - 14:00 - Wholesale Inventories M/M.
US - 14:30 - Crude Oil Inventories.
US - 19:00 - Consumer Credit M/M.
Thursday Nov 8th:
GE - 06:00 - Trade Balance.
FR - 06:45 - Government Budget Balance.
UK - 11:00 - Interest Rate Statement.
EU - 11:45 - Interest Rate Announcement.
US - 12:30 - Unemployment Claims.
EU - 12:30 - ECB President Trichet Speaks.
US - 14:30 - Leading Index M/M.
Friday Nov 9th:
FR - 06:45 - French Industrial Production M/M.
FR - 06:45 - Trade Balance.
UK - 08:30 - Trade Balance.
EU - 10:00 - Composite Leading Indicators M/M.
US - 12:30 - Trade Balance.
US - 12:30 - Import Price Index M/M.
US - 12:30 - Consumer Sentiment.
EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany
Dollar in the doldrums
The Dollar again grabbed the headlines last week as it hit all time lows against the Euro and levels not seen in generations against the Pound & Canadian Dollar.
The reason for this drop in the medium term has been the gradual weakening of the US economy as it tries to fight the effects of the credit crunch and a housing slump. Recent Case-Schiller data showed that US house prices fell for the eighth consecutive month with most of the countrys regions posting declines. On Thursday, banking stocks suffering their worse fall for years as US giant Citigroup was battered by analysts down grades. This comes on top of a recent 57% drop in third quarter profits compared to last year. Citigroup are now in danger of dropping out of the top 10 US companies by market capitalisation. Top of the list Exxon MobilAlan Greenspan went on record as saying that the US trade gap implied dollar erosion and with an accelerating decline. also disappointed with below estimate earnings despite record oil prices. To cap all this negative data, former Fed chairman
Of course the short term reason for the drop in the dollar last week was the widely expected quarter point cut in interest rates by the FOMC. Notable however, was the unusually hawkish language that accompanied the statement. One economist called the wording as subtle as a sledge hammer because of the bold way it indicated that this was the last cut for a while. Hawkish comments from the MPC combined to send the USD/ GBP exchange rate within touching distance of $2.09 to the pound.
Equity markets initially greeted the FOMC decision positively, pushing the S&P 500 past last weeks high and the Nasdaq to fresh new highs for 2007. On Thursday, however all the good work was undone as earnings fears and the reduced probability of further cuts brought out the sellers in force. The fall was of the same magnitude as the mauling on the 19th of October which brought out lots of shock headlines in the mainstream press. This time it was hardly reported. When the press gets hold of something, it may pay to go the other way. When the same thing is met with silence it could be time to get genuinely worried.
Notable announcements next week are UK industrial production figures on Monday, US Non-farm productivity figures on Wednesday, trade balance numbers and consumer sentiment data on Friday. In all it looks a data heavy week and we havent even mentioned the MPC and ECB interest rate decisions on Thursday. The consensus estimate is that both central banks will announce no change statements, but as ever it is the reading between the lines on the next decision that will cause the excitement. ECB president Trichet is speaking after the statement.
Last weeks German PMI figures were well below estimates, which might call into question the widely held view that the next ECB move will be up. Fridays payroll numbers indicated that there may be life in the US economy yet. The dollar may have further to fall, but perhaps Greenspans accelerated decline may not come to fruition, particularly against the Euro. If the ECB keep rates on hold over the coming months, or even cuts them, as some now think they might, then the dollars decline could become more measured.
Therefore, a long term trade that picks up on the possibility of a slower Dollar decline might be attractive. A no touch trade on the EUR/ USD with the trigger set to 1.50 over 180 days pays a 78% return. If the dollar falls only a little bit more, stays still or strengthens against the Euro then the trade wins. The trade is not without its risks, but that is reflected in the price.
David Evans
