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Video for May 7th, 2008 (4 min 15 sec): Dollar Strengthens After Weak Data Emerges from UK and Euro-zone
EUR Retail Sales Decline 1.6%, Weakest Since at Least 1995
European retail sales declined 0.4% in March from February and were down 1.6% compared to March of last year. It's the poorest annual reading since records began being kept in 1995. Consumers curbed their spending as high prices for food and fuel ate into their purchasing power. GER Factory Orders Down 5% in Annual Terms German factory orders also had a weak March. Orders were down 0.6% on the month and 5% on the year. There was a decline in domestic demand for both investment and consumer goods, though orders for exports to Asian markets helped offset some of the losses. EUR/USD - Euro Sinks 200 Pips As Data Disappoints
The Euro-Dollar pair, after advancing the first two sessions, swung about 200 pips lower from its Tuesdays high. The Euro was already heading lower prior to the fundamental release, and the weak sales accelerated its losses. After the US open the pair was testing support near 1.5350, a 6-week low set last Friday. EUR/JPY - Euro Weakens vs Yen Following News
The Euro fell vs. the Yen following the news, and continued falling during NY trading. European stocks were generally higher, but the weak fundamental data overshadowed the rally. From its high prior to the release, the pair climbed 100 pips in the Yen's favor. UK Nationwide Consumer Confidence Hits 70, Lowest Since Inception of Survey in 2004 In the UK, the Nationwide Consumer Confidence Index surprised on the downside, falling 7 points to 70 in April. It's the lowest figure since polling began in May 2004. Just like in Europe, consumers complained about higher food and energy prices. In addition, the struggling housing sector only adds more pressure to households who are seeing the value of their homes declining. UK Industrial Production Falls 0.5% in March UK's industrial output levels fell 0.5% in March compared to February, dragged down by declines in electricity, gas and water production. Manufacturing, the key component also declined 0.5%. Production has been mixed this year, but demand will slow as global growth goes through a downturn. GBP/USD - Pound Falls After Poor Fundamental Data
The Pound was pressured overnight by the consumer confidence data and its losses continued after the production data. The Pound-Dollar pair swung more than 220 pips from its open breaking through support at 1.9650. It found new support at 1.95 in NY morning trading.
US Labor Productivity Increases, Labor Costs Cool
In the US, labor productivity increased 2.2% in the first quarter, as firms cut staff hours and squeezed more output out of fewer workers. Payroll data has shown that the economy has shed 260,000 jobs so far this year. Labor costs cooled, rising 2.2% compared to the 4th quarters 2.8%. A loose labor market and increased productivity should keep wage inflation in check in the near term. US Pending Home Sales Decline 1%, Matches Expectations Pending home sales declined by 1% in March, matching forecasts. The report from the National Association of Realtors says that sales will be flat for the next couple of months before improving over the summer. Any recovery hinges on access to affordable loans, which is being held back by restrictive lending requirements as a result of the sub-prime mortgage meltdown. USD/JPY - Dollar Pares Yesterday's Losses, Tests 105.50
The Dollar recovered yesterday's losses against the Yen in a 150 pip rally before testing resistance near 105.50. US stocks were trading choppy in the first half of the session, with the three main indexes - the Dow, Nasdaq and the S&P - in the red at noon NY time. The pair was consolidating after hitting its intra-day high. Upcoming Releases Both New Zealand and Australia post employment figures later today. Germany will unveil its trade balance and industrial production data overnight. Tomorrow morning, the Bank of England and the European Central Bank will decide on rates, with both expected to hold. Canada reveals housing starts, while the US releases weekly jobless claims and wholesale inventories. |
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