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At 6:00:00 AM E-12 May Eurozone Business Sentiment (exp-9.1, prev -11.0) E-12 May Eurozone Business Climate Indicator (exp -0.5, prev -0.6) E-12 April Unemployment (exp 8.4% prev 8.4%) E-12 May Eurozone Consumer Sentiment (exp -10.1, prev -10.0) E-12 Eurozone May Overall Economic Sentiment (exp 99.7, prev 99.4) At 2:45:00 AM E-12 French May Consumer Confidence (exp -17.3, prev -18.0) UK Market and Public Holiday
EUR/USD hit $0.9425 a fresh 16-months high, rising on a combination of weakness in US stocks and remarkably strong Eurozone manufacturing PMI that reached its highest level since February 2001 of 51.5 in May from the previous month's reading of 50.7. Further demonstrating the solidity of pro euro sentiment is the fact that last week, euro futures contracts still registered an increase in net long positions at 31,725 contracts, compared to a decrease in net long positions of yen, Swiss franc and pound futures contracts. Today, EU Monetary Affairs Commissioner Pedro Solbes said there was no reason the Eurozone economy could not live with the euro above 93 cents. Dutch Finance Minister Gerrit Zalm from his part said the euro's recent appreciation caused no worry, while his Spanish counterpart Rato said the euro reflected the economic fundamentals of the region. The statements were also with that of a senior unidentified ECB source telling Market News International that the recent strengthening. EUR/USD resistance at 94.50 and 95.0. Support is seen at 93.60 and 93.0.
USD/JPY is trading around 123.55, as markets keep wary of another forex intervention after Finance Minister Shiokawa said he was watching forex rates carefully since recent forex moves have been volatile. Ministry of Finance's Mizuoguchi remarked that rapid forex movements are undesirable and warned that he would take appropriate action as needed. A spokesman for the government says that Japanese Prime Minister Koizumi will announce several economic policy measures tomorrow, including a mix of tax and spending increases and cuts. It will be interesting to see whether or not Koizumi will be able to abide by his election pledge to cap bond issuances at 30 trillion yen, in light of Japan's exorbitant debt that is calculated to swell to 140% of GDP by next spring. April leading diffusion index eased to 72.2 from the previous month's 81.8 but hold above the key 50-level for the second month in a row to indicate an improvement in the economy. The coincident index rose 77.8 in April from the previous 61.1, marking its second straight month of growth. The last time the index registered above the 50-level for two consecutive months was in October 2000, and the significance of this fact is whether the trend will continue for a third month and herald an economic upturn. Tokyo's Nikkei fell 2% or -241 pts to 11660. Support at 123.0 and this year's low of 122.80. Upside is capped at 124.0, 124.60 and 125.0.
Other noteworthy data due to be released from Japan this week include the MoF Corporate survey, ESRI Tokyo consumer sentiment index and the preliminary Q1 GDP. Market pundits are anticipating a robust 4.5% q/q GDP for the January-March period in a turnaround from the previous quarter's 4.8%. The forecasts have generated excitement since it would mark the highest annual growth in 2 years, mostly because of an increase in exports. However, Japanese officials have tried to temper expectations and restrain possible yen appreciation in reaction to the positive data. Another reason to be wary is that the surge in the GDP numbers could be due to an alteration in the calculation of GDP. With more positive Japanese economic data in store, currency players should be mindful of the Bank of Japan's willingness to intervene to stem sharp rises in the yen.