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At 11:00:00 AM US Weekly ISI Company Index (exp n/f prev 41.7) At 10:00:00 AM US May Challenger Layoffs (exp n/f prev112.6k) At 9:00:00 AM US BTM/UBSW Chain Store Sales (exp n/f, prev -0.2%) At 8:55:00 AM US Weekly Redbook Chain Store Sales (exp n/f, prev -0.5%)
The dollar fell to a 16 month low vs. the euro around 94.45 and plunged to its weakest level since January 2000 vs. the Swiss franc, hurt by combination of weakness in the US stocks and positive signs of recovery in the eurozone economies. April eurozone unemployment came at 8.3% from a revised 8.2% in March. A business climate indicator for the eurozone countries rose to -0.24 in May, from -0.64 in April. Markets forecasted an average reading of -0.5% in May. The EU Commission attributed the number by an improvement in order books. May economic eurozone sentiment improved more than expected to 99.8 from 99.4 in April. French May consumer confidence improved to -12 from -18 in April the strongest reading since -11 in December 2001. French data came stronger than market expectations for -17.3 in May. The positive consumer confidence reading is due to higher manufacturing industry activity and shows the latest sing of recovery in French economy.Rates at the ECB 's weekly liquidity tender edged down as the markets expectations about the rate rise on this Thursday's meeting diminished. The ECB allocated 65 bln euros in its 14 day refinancing agreements at 3.33% and above weighted average rate of 3.34% down one basis point from last week's allocation. Rates at the weekly tender represents both the current liquidity conditions in the banking system and market expectations for the official interest rates.The ECB has set the floor for bidding rates at 3.25% in the weekly tenders. 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. The euro also gained vs. the pound, rising to its highest levels since October 1999 at 64.45 pence helped but the EUR/USD gains. Since the beginning of this year the single currency gained more than 5% vs. the pound.. EUR/USD resistance at 94.55 and 95.0. Support is seen at 93.60 and 93.0.
USD/JPY is trading around 123.30, as markets remain suspicious 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.
Yesterday, the losses in US stocks weighted significantly on the dollar as the Dow extended its triple digit loss to a 215-pt decline in the last 15 minutes of trading to close at 9709. S&P500 lost 2.48% to 1040, breaching below the key support of 1049. Amid the primary catalysts to yesterdays sell-off were news of the resignation of Tyco's CEO Dennis Kozlowski, who is already under investigation for tax evasion and questionable accounting practices. Also news of a possible suicide of the El Paso Corp's Treasurer Charles Dana Rice committed suicide is also weighing on sentiment. El Paso's shares fell 18%. The company is amid the handful of energy trading companies to be under regulatory scrutiny amid allegations of improper trading and accounting practices. Gold rose higher than $330 an ounce for the first time in two and a half years as investors are searching for alternative ways to invest amid falling U.S. stocks and the dollar.