[B]Talking Points
• Japanese Yen: 105.50 holds most of night as Nikkei rallies
• Euro: German Retail Sales plunge pushing unit below 1.5500
• Pound: Plumbs 1.9700 but bounces
• Swiss Franc; KOF shows a slowdown
• US Dollar: PCE, Chicago PMI on tap[/B]
German Retail Sales plunged -1.7% versus an expected 0.6% gain dragging EURUSD below the 1.5500 figure for the first time in 10 days. When adjusted for inflation German consumers spent less that last year as skyrocketing gasoline prices sapped purchasing power in Eurozone’s largest and most important economy.
The news was particularly surprising given the robust rebound in Retail PMI numbers earlier in the week, but nevertheless confirms the overall trend of the most recent data from the region which shows that the European economy is suddenly stagnating. The EURUSD plumbed an overnight low of 1.5467 but managed to climb back above 1.5500 by early New York trade on the back of hotter than expected EZ CPI data which registered a record reading of 3.6% annual rate.
The story in the EZ is a familiar one as inflationary forces are counterbalanced by rapid deceleration in consumer demand leaving the ECB monetary policy essentially at a standstill. The EURUSD has been hit hard this week, as currency traders focused on a string of disappointing economic releases from the region. Next week however, the dynamic may turn as US data takes center stage and all attention turns to the NFP report. For the time being US economy has avoided falling into a recession and through hardly stellar, the US GDP report this week was revised upward to 0.9% eking out small but positive growth.
Today’s Chicago PMI report may provide a glimpse into next week’s ISM Manufacturing data with markets expecting a slight increase from the month prior. Trading is likely to remain quiet for the rest of the day as EURUSD consolidates near the midfield line of its 1.50-1.60 range and prepares for next week’s key events which could disrupt the general sense of equilibrium currently in the FX market
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