Global Events Calendar [21-07-2008] - [25-07-2008]

*Time displayed is based on Singapore Time (GMT+8:00)

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Global Events Calendar [21-07-2008] - [25-07-2008]
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Monday [21-07-2008]
6:45am--------------NZD Visitor Arrivals m/m
[Whole Day Event]---JPY Holiday: Marine Day
7:01am--------------GBP Rightmove House Price Index m/m
9:30am--------------AUD PPI q/q
9:30am--------------AUD New Motor Vehicle Sales m/m
11:00am-------------NZD Credit Card Spending y/y
3:15pm--------------CHF PPI m/m
10:00pm-------------USD Leading Index m/m

Tuesday [22-07-2008]
7:50am---JPY All Industries Activity Index m/m
2:15pm---CHF Trade Balance
4:45pm---GBP BOE Governor King Speaks
8:10pm---USD Treasury Sec Paulson Speaks
8:30pm---CAD Core Retail Sales m/m
8:30pm---CAD Retail Sales m/m
8:30pm---USD FOMC Member Plosser Speaks
10:00pm--USD House Price Index m/m
10:00pm--USD Richmond Manufacturing Index

Wednesday [23-07-2008]
9:30am---AUD CPI q/q
9:30am---AUD Trimmed Mean CPI q/q
2:45pm---EUR French Consumer Spending m/m
4:00pm---EUR Italian Retail Sales m/m
4:30pm---GBP MPC Meeting Minutes
4:30pm---GBP BBA Mortgage Approvals
5:00pm---EUR Industrial New Orders m/m
6:00pm---GBP CBI Industrial Trends Orders
7:00pm---CAD Core CPI m/m
7:00pm---CAD CPI m/m
10:35pm--USD Crude Oil Inventories

Thursday [24-07-2008]
2:00am---USD Beige Book
5:00am---NZD Monetary Policy Statement
5:00am---NZD Official Cash Rate
7:50am---JPY Trade Balance
3:00pm---EUR French Manufacturing PMI (p)
3:00pm---EUR French Services PMI (p)
3:30pm---EUR German Manufacturing PMI (p)
3:30pm---EUR German Services PMI (p)
4:00pm---EUR German Ifo Business Climate Index
4:00pm---EUR German Ifo Business Expectations Index
4:00pm---EUR Manufacturing PMI (p)
4:00pm---EUR Current Account
4:00pm---EUR Services PMI (p)
4:30pm---GBP Retail Sales m/m
8:30pm---USD Unemployment Claims
10:00pm--USD Existing Home Sales
10:00pm--USD FOMC Member Geithner Speaks
10:35pm--USD Natural Gas Storage

Friday [25-07-2008]
1:00am---GBP MPC Member Bean Speaks
7:30am---JPY Tokyo Core CPI y/y
7:30am---JPY National Core CPI y/y
7:50am---JPY CSPI y/y
4:00pm---EUR M3 Money Supply y/y
4:30pm---GBP Prelim GDP q/q
4:30pm---GBP Index of Services 3m/3m
8:30pm---USD Core Durable Goods Orders m/m
8:30pm---USD Durable Goods Orders m/m
9:55pm---USD Revised UoM Consumer Sentiment
10:00pm--USD New Home Sales
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US CPI Rises At Fastest Annual Pace In 17 Years

Source: Daily FX

Consumer prices in the US surged significantly more than expected in June, as the Labor Department's index jumped 1.1 percent during the month, bringing the annual rate up to a more than 17 year high of 5.0 percent. Unsurprisingly, a breakdown of the report shows that energy prices were responsible for the bulk of the rise, as they gained 6.6 percent from a month ago and 24.7 percent from a year earlier, while food costs rose 0.8 percent. What may be most disconcerting to the Federal Reserve, however, was the unexpected increase in core CPI of 0.3 percent during the month and 2.4 percent from a year earlier. As Federal Reserve Chairman Ben Bernanke noted yesterday that "the currently high level of inflation, if sustained, might lead the public to revise up its expectations for longer-term inflation." Nevertheless, the central bank is unlikely to raise interest rates in response due to the looming downside risks to growth and unstable conditions in the financial sector.

US Industrial Production Grows Most In 11 Month

Source: Daily FX

Despite record raw material prices and a generational low in domestic demand, factory activity actually rose at its fastest pace in 11 months through June. The Federal Reserve's Industrial Production survey reported a 0.5 percent pick up in activity last month and a pick up in capacity utilization to 79.9 percent. This is a promising sign for general growth as fears of a recession are still threatening the world's largest economy with consumer spending fading and the housing recession deepening. At the same time, the source of this strength was largely seen in temporary or external components. Export bookings accounted for a generous portion of the pick up in production. Looking deeper into the components, a 0.2 percent improvement in the manufacturing component was largely encouraged by a 5.4 percent jump in auto and parts orders as the supplier strike came to an end. From the sector breakdown, production of consumer goods rose 0.7 percent, business equipment increased 0.2 percent and energy output jumped 1.0 percent. With the housing slump still in full swing, construction dropped 0.9 percent.

Osamex's Quote of the day for Traders and Investors...

Osamex says, "Learn to appreciate a grain of rice then you will appreciate a plate of rice. When you really appreciate a plate of rice then you will appreciate a rice field."

European Inflation Rises To 4%, As Energy Costs Soar

Source: Daily FX

European consume prices rose to 4.0% from 3.7% the month prior on an annualized basis, which is the highest in more than 16 years. The record setting pace of oil has fed rising gasoline and heating costs. The ECB and economist had expected prices to reach these levels, which was the cause for the central bank to raise its benchmark interest rate to a seven year high of 4.25%. The regions largest economy Germany saw pries rise 3.4%, which has led to investor confidence falling to a record low in July. The European economy is beginning to whither in the face of the headwinds from the U.S. credit crisis and a global slowdown, which has increased fears that the central bankʼs raising of credit costs will push the economy towards a recession. Therefore, expectations are that the recent rate hike was a single event and that rates will remain on hold the remainder of the year. If growth continues to weaken and inflation pressures begin to ease the next move for the ECB may be to lower rates, despite their price stability mandate.

Dollar Off Lows But Nervousness Persists - Will Oil Help?

Source: Daily FX

A relatively quiet night of consolidation in currency markets tonight as both Euro and Sterling spent most of the early European session basing about the 1.5900 and 2.0000 levels respectively. After making new record highs the EUR/USD dropped sharply in yesterday's North American trade mainly on the collapse in oil and better tone in equities as investors became more comfortable with the GSE rescue plan.

Nevertheless, nervousness persists in the FX market as traders worry about further systemic damage to US financial sector should any other major institutions fail in the near future. Analysts were quick to point out that the rescue of Indy Mac took more than 10% of FDIC capital leaving little room for error if other banks follow suit into insolvency as their mortgage assets depreciate.

The Dollar therefore remains in a precarious position as the markets adopt a state of siege mentality. The greatest fear amongst dollar bulls is that the massive snake lines that greeted the failure of Indy Mac will be repeated not only in California, but nationwide if more regional bank go under. The run on the bank dynamic is one of the most damaging developments for a country's currency as it demonstrates total lack of confidence in the system.

The market will get a glimpse of one measure of confidence today when the TICS data is released at 13:00 GMT. The TICS report is two months back so the data is relatively backward looking and does not reflect the current turmoil in the GSEs but it may still offer a clue as to the appetite of foreign investors for US capital assets. One of the key drivers behind the GSE rescue plan was the fact that Japan and China were major holders of those assets and any markdown in their value would curtail future foreign investment flows into the US which have been critical to the financing of the US trade deficit. Therefore any sharp drop off in the TICs figure could add fuel fire and push the greenback lower toady.

The one positive countervailing force for the dollar has been oil. Yesterday's collapse was one of the major reasons for the buck's recovery and should crude decline further today it may provide a much needed counterbalance to all of the negative news over the past 48 hours. Nevertheless the positive impact of lower crude may have a limited impact. Concern over systemic risk remains the dominant theme of trade in FX and could push the EUR/USD higher if angst over the state of the US economy reaches panic levels once again.

My USD/JPY Trade (15-07-2008) --- Position Squared

*Click on the charts (Before & After) for the enlarged version.

Hello everyone,

I'm busy these days. Apologies for not posting my trades often. 400+pips was made for the month of June 2008.

My trade today on the USD/JPY. For this trade I was a little conservative due to the data release coming out and one of them is of course Fed's chairman's testimony.

I initiated a short positiong at 08:55am (Singapore Time) | 12:55am (GMT) at the price line of 106.02. A continous candle pattern (Falling Three Method) and price action and my indicators to support my analysis.

My Stop Loss was at 106.17 (15pips) and Target Profit was at 105.65 (37pips). Risk : Reward = 15 : 37 = 1 : 2.47.

Target Profit got hit at 04:50pm (Singapore Time) | 08:50am (GMT).

37pips profit for this trade :)

Peace and trade safely everyone...

Testimony Disappoints the Dollar...

Source: Crown Forex

The session's highlight was upon Bernanke's testimony before the House Financial Services Committee. Fears have been rising lately and pressuring U.S equity markets as Fannie Mae and Freddie Mac might extend their problems tied to the U.S mortgage crisis and the Federal backed lenders might be facing capital crisis still.

The testimonials though failed to support the Dollar opposed to expectations as Paulson's defense to the government supported lenders and that they are going through rough times which they are adequately capitalized to face such times. While Bernanke was targeting his testimony at now and future reforms that are aimed to secure markets with no clear indication for markets such as they were looking for. The indication was given that the financial system and U.S markets are long to revive and more scrutiny is added to the extent of ongoing losses and write-downs as now the economy is still fragile setting behind any rate hikes for the fed as markets remain sensitive for liquidity.

The disappointment left the Dollar weaker as the Euro raced to set the new high at 1.5786 and trading higher will take the Euro to face the critical resistance at 1.5830s which will be cleared as trading solidifies above 1.58 levels. While momentum indicators support the bullish rise further.

Sterling was also pulled to the upside attempting the critical resistance level at 1.9820 to set the high at 1.9823 retreating back then to now trading levels at 1.9760s though momentum is valid to support another attempt at the resistance level which is the Pound manages to close above on daily terms will extend the upside wave till $2 barrier.

The USD/JPY reversed the downside as well after recoding the high today at 107.42 and the fresh low as set at strong support level of 106.69 this level if breached will provide further bearish momentum for the pair to continue to the downside which might take the pair till 105 levels once more which will be confirmed furthermore by solid trading below 106.20s and closing on a daily basis below the previously mentioned support level.

Osamex's Quote of the day for Traders and Investors...

Osamex says, "For those who refuse or mentally unable to fully embrace failure. They are the ones that will never appreciate victory!"

Fed plans new rules to protect future homebuyers...

Source: Mail.com

The Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices, its most sweeping response to a housing crisis that has propelled foreclosures to record highs.

Fed Chairman Ben Bernanke spoke of the much-awaited rules in a broader speech Tuesday about the challenges confronting policymakers in trying to stabilize a shaky U.S. financial system. To that end, Bernanke said the Fed may give squeezed Wall Street firms more time to tap the central bank's emergency loan program.

To prevent a repeat of the current mortgage mess, Bernanke said the Fed will adopt rules cracking down on a range of shady lending practices that has burned many of the nation's riskiest "subprime" borrowers -- those with spotty credit or low incomes -- who were hardest hit by the housing and credit debacles.

The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.

"These new rules ... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Bernanke said.

Consumer groups have complained that the proposed rules aren't strong enough, while mortgage lenders worry that they are too tough and could crimp customers' choices.

In an extraordinary action aimed at averting a financial catastrophe, the Fed in March agreed to let investment houses go to the Fed -- on a temporary basis -- for a quick, overnight source of cash. Those loan privileges, which are supposed to last through mid-September, are similar to those permanently afforded to commercial banks for years.

"We are currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end should the current unusual and exigent circumstances continue to prevail in dealer funding markets," Bernanke said in prepared remarks to a mortgage-lending forum in Arlington, Va.

The Fed's decision to act -- temporarily at least -- as a lender of last resort for Wall Street firms was made after a run on Bear Stearns pushed the investment bank to the brink of bankruptcy and raised fears that others might be in jeopardy. It was the broadest use of the Fed's lending powers since the 1930s.

Bear Stearns was eventually taken over by JPMorgan Chase & Co., with the Fed providing $28.82 billion in financial backing.

Those controversial decisions have drawn criticism from Democrats in Congress and elsewhere that the Fed is bailing out Wall Street and putting billions of taxpayer dollars at risk, in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.

In his speech Tuesday, the Fed chief defended those actions anew. If the Fed didn't intervene, he said, problems in financial markets would have snowballed, imperiling the country.

"Allowing Bear Stearns to fail so abruptly at a time when the financial markets were already under considerable stress would likely have had extremely adverse implications for the financial system and for the broader economy," Bernanke said to the mortgage forum, organized by the Federal Deposit Insurance Corp.

The Fed's consideration of giving Wall Street firms more time to tap the Fed's emergency loan program is part of an ongoing effort by the central bank to bring back stability to fragile financial markets and help to bolster shaky confidence on the part of investors.

Policymakers -- in the White House, in Congress and other federal agencies -- will need to work together to come up with ways to make the U.S. financial system more resilient and stable and to prevent a repeat of the types of problems that brought about the end of Bear Stearns, an 85-year-old institution, Bernanke said.

Although those efforts are already under way and will be the focus of a House Financial Services Committee hearing Thursday, it will fall to the next president and next Congress to settle them. Both Bernanke and Treasury Secretary Henry Paulson are scheduled to testify at Thursday's hearing.

The Bush administration has proposed revamping the nation's financial regulatory structure. That plan would make the Fed an ubercop in charge of financial market stability. But the Fed would lose daily supervision of big banks. Bernanke said the Fed must maintain this power if it is to be an effective overseer of financial stability.

The Fed, which regulates banks, and the Securities and Exchange Commission, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system.

Over the longer term, though, Congress may need to adopt legislation to bolster supervision of investment banks and other large securities dealers, Bernanke said.

Bernanke recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the SEC's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.

Global Events Calendar [30-06-2008] - [04-07-2008]

*Time displayed is based on Singapore Time (+08:00GMT).

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Global Events Calendar [30-06-2008] - [04-07-2008]
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Monday [30-06-2008]
6:45am---NZD Building Consents m/m
7:01am---GBP Consumer Confidence
7:15am---JPY Manufacturing PMI
8:30am---AUD TDMI Inflation Gauge m/m
9:30am---AUD Private Sector Credit m/m
11:00am--NZD Business Confidence
1:00pm---JPY Housing Starts y/y
4:30pm---GBP Index of Services 3m/3m
4:30pm---GBP Mortgage Approvals
4:30pm---GBP Net Lending to Individuals m/m
5:00pm---EUR CPI Flash Estimate y/y
5:00pm---EUR Italian Prelim CPI m/m
8:30pm---CAD GDP m/m
9:45pm---USD Chicago PMI

Tuesday [01-07-2008]
7:30am--------------AUD Manufacturing PMI
7:50am--------------JPY Tankan Large Manufacturers Index
7:50am--------------JPY Tankan Large Non-Manufacturers Index
9:30am--------------JPY Average Cash Earnings y/y
12:30pm-------------AUD Cash Rate
12:30pm-------------AUD RBA Rate Statement
2:00pm--------------EUR German Retail Sales m/m
2:00pm--------------GBP Nationwide House Prices m/m
2:30pm--------------AUD Index of Commodity Prices y/y
3:30pm--------------CHF SVME PMI
3:55pm--------------EUR German Unemployment Change
4:00pm--------------EUR Manufacturing PMI (r)
4:30pm--------------GBP Manufacturing PMI
5:00pm--------------EUR Unemployment Rate
[Whole Day Event]---CAD Holiday: Canada Day
10:00pm-------------USD ISM Manufacturing Index
10:00pm-------------USD ISM Manufacturing Prices
10:00pm-------------USD Construction Spending m/m

Wednesday [02-07-2008]
[Time Unknown]---USD Domestic Vehicle Sales
7:50am-----------JPY Monetary Base y/y
9:30am-----------AUD Building Approvals m/m
9:30am-----------AUD Retail Sales m/m
3:15pm-----------EUR ECB President Trichet Speaks
4:30pm-----------GBP Construction PMI
4:30pm-----------GBP Housing Equity Withdrawal q/q
5:00pm-----------EUR PPI m/m
7:30pm-----------USD Challenger Job Cuts y/y
8:15pm-----------USD ADP Nonfarm Employment Change
10:00pm----------USD Factory Orders m/m
10:30pm----------USD Crude Oil Inventories
11:00pm----------USD Treasury Sec Paulson Speaks

Thursday [03-07-2008]
12:00am----------USD FOMC Member Mishkin Speaks
7:30am-----------AUD Services PMI
9:30am-----------AUD Trade Balance
11:00am----------NZD ANZ Commodity Price Index
1:45pm-----------CHF CPI m/m
[Time Unknown]---GBP Halifax HPI m/m
4:00pm-----------EUR Services PMI (p)
4:30pm-----------GBP Services PMI
4:30pm-----------GBP Credit Conditions Survey
5:00pm-----------CHF SNB Monetary Policy Report
5:00pm-----------EUR Retail Sales m/m
7:45pm-----------EUR Minimum Bid Rate
8:30pm-----------EUR ECB Press Conference
8:30pm-----------USD Nonfarm Employment Change
8:30pm-----------USD Unemployment Rate
8:30pm-----------USD Average Hourly Earnings m/m
8:30pm-----------USD Unemployment Claims
10:00pm----------USD ISM Non-Manufacturing Composite
10:30pm----------USD Natural Gas Storage

Friday [04-07-2008]
1:00pm--------------JPY Leading Economic Index
2:45pm--------------EUR French Government Budget Balance
6:00pm--------------EUR German Factory Orders m/m
[Whole Day Event]---USD Holiday: Independence Day

[Additional for the week]
Saturday [05-07-2008]
6:00pm---EUR ECB President Trichet Speaks
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My USD/CHF Trade (26-06-2008) --- Position Squared

*Click on the charts (Before, Update1 & After) for the enlarged version.

Hello everyone,

My trade on the USD/CHF on the [26-06-2007]. I initiated a short position on this pair at the price line of 1.0337 at 05:04pm (Singapore Time) | 09:04am (GMT).

What I saw was a simple analysis. Price action analysis. After a huge draw down from the day before, I was definitely looking for a lower high to enter the market. Waiting worth the wait when market started to create a lower high plus it broke my support which is the previous day low. 6ma is still below 23ma. In addition, my Stochs are pointing downwards.

Hence I waited for a better filled price and initiated a short position at the price line of 1.0337. My Stop Loss was at 1.0360 (23pips) and Target Profit at 1.0220 (117pips). Risk : Reward = 23 : 117 = 1 : 5.09.

Basically, after I initiated the trade, I left it alone and proceed to do my work :P Hahaha!!! The next day, [27-06-2008], I shifted my Stop Loss to Protective Stop at the price line of 1.0300 (37pips in the money) when I was around 90pips in the money around 09:55am (Singapore Time) | 01:55am (GMT).

During the same day, my Profit Target was hit at 03:40pm (Singapore Time) | 07:40pm (GMT).

117pips profit for this trade :)

Peace and trade safely everyone...

My EUR/USD Trade (24-06-2008) --- Position Squared

*Click on the charts (Before & After) for the enlarged version.

Hello everyone,

Yesterday, I initiated an buy position at the price line of 1.5546 while I was in the office at 04:57pm (Singapore Time) | 06:57am (GMT). As you will notice from my charts, I do not have my usual custom indicators on it and that is to show how flexible I am on reading charts and my basis of trading is not bias to indicators but purely on price action and candle studies with indicators as an advisors only.

Anyway, what I saw was that. My price action analysis. Market didn't have the power to go down lower or creating a lower low despite a huge draw down from the day before. It bounces at my 200ma and the 04:00pm (Singapore Time) | 06:00am (GMT) candle broke a minor resistance at 1.5525. 6ma is crossing above 23ma.

Hence, I initiated a long position at the price line of 1.5546 at 04:57pm (Singapore Time) | 06:57am (GMT).

My Stop Loss was at 1.5517 (29pips) and Target Profit at 1.5615 (69pips). Why my Target Profit is there? Price action resistance. Basically after I have placed my trade, I just ignored it till I got home. My Target Profit was hit yesterday (24-06-2008) at 10:15pm (Singapore Time) | 02:15pm (GMT).

69pips profit for this trade :)

Peace and trade safely everyone...

USD's Interest Rate (25-June-2008)...

Hello everyone,

Tonight's FOMC Interest Rate Statement release at 2:15am (Singapore Time) | 6:15pm (GMT). Forecast says that they are looking to hold their current rate at 2.00%. Expect market to be thin with most traders waiting for the release but as Commenciante Traders and Samurai Traders, we are not going to trade the news as we will wait for the outcome and then go in with the flow of the market. For me, I will lay off and just look at the market for my pleasure and if there is any built in set-up for me to enter then I will initiate a position but only if there is a very nice and strong built in set-up.

I have already attained my 69pips from EUR/USD from yesterday, will update my trade asap here.

Other than that, peace and trade safe everyone...

S&P/Case-Shiller Report Keeps US Housing Recession On Track

Source: Daily FX

Ongoing foreclosures, rising mortgage rates and fading consumer confidence is leading Americans to further lower the asking price on their homes in an attempt to attract an ever contracting pool of potential buyers. The lagging S&P/Case-Shiller Composite 20 index fell 15.3 percent in April from the same period a year ago. And, while this was a more mild than expected drop in home values than economist had expected with a 16 percent consensus, the decline was still the largest in the indicators seven year history. Looking at the more active month-over-month reading, there was at least one promising nuance. The 1.36 percent decline in the 20-city index over the month extended a trend of steady declines from January 2007, but this was also the smallest monthly contraction in over half a year. However, as the economy is warped and shaped by rising unemployment and consumer sentiment at multi-decade lows as well as rising inventories from foreclosures and stricter lending regulation. On the other hand, this is a lagging indicators compared to the government's and National Association of Realtors' data; and the market is therefore less responsive.

US Consumer Confidence Falls More Than Expected To Fresh 16-Year Low

Source: Daily FX

US consumer confidence, as measured by the Conference Board, fell to a fresh 16-year low of 50.4 in June from 58.1. The news was much worse than expected, as the index was forecasted to slump to 56.0. A breakdown of the report shows sentiment on the present situation, future, and labor markets turned increasingly pessimistic. In fact, the employment component indicated that 30.5 percent of respondents said jobs were hard to get, up from 28.3 percent, while 14.1 percent said jobs were plentiful, down from 16.1 percent. These indexes have shown a consistent deterioration since December, and with the US unemployment rate rising steadily and energy and good prices rocketing, consumer confidence is likely to slump further, boding ill for consumption growth in the US.

Euro Back To 1.5500 As IFO, PMI Plummet. Will ECB Really Hike Rates?

Source: Daily FX

The EURUSD dropped more than 100 points from its open in Asia today after a slew of economic data surprised to the downside confirming the bear's long held thesis that the region's economy is beginning to buckle under the dual weight of high exchange rates and high energy prices. EZ Manufacturing PMI slipped to below the 50 boom/bust line for the first time in more than 2 years dragged lower by the sharp decline in French readings. In addition, the IFO survey fell more than expected printing at 101.3 versus 102.5 and considerably worse than May's reading of 103.5.

The euro which rallied at the end of last week on uber-hawkish rhetoric from ECB officials indicating that a rate increase next month is a foregone conclusion, returned to the familiar 1.5500 level as doubts crept into trader's minds regarding the certainty of the rate hike. Although over the past two weeks nearly everyone at ECB from President Trichet on down has echoed the common refrain that inflation remains too high necessitating further tightening, economic reality may temper any immediate plans to raise rates.

With energy costs soaring and high exchange rates making price hikes a major challenge to most European businesses does ECB really want to take this opportunity to put a chokehold on credit? EZ businesses rely on bank financing much more that US companies. Therefore an increase in the central bank call rate, were it to go through, would likely exacerbate the damage to European economic growth in the second half of 2008.

The answer to this question most likely lies with the price of oil. If crude continues to trade above $130/bbl the ECB may feel compelled to act despite the damage to growth, fearing the impact of persistently elevated inflation expectations. If on the other hand, oil prices start to ease this week dropping to $120/bbl or lower, the monetary authorities in Frankfurt may chose to stand down for another month.

Meanwhile, the North American calendar is barren for the day and therefore the US session may be dominated by the reaction to the IFO news and the action in the NYMEX pits. By the middle of the week attention will turn to the FOMC meeting and its consequent statement, but for now the markets should continue to digest the latest economic news from Europe.

German Business Confidence Falls, As Euro-Zone Economy Contracts

Source: Daily FX

German business confidence fell more than expected and Europe's manufacturing and service sectors fell into contraction. The IFO institute survey of 7,000 executives showed that rising oil prices and the prospect of an ECB rate hike has greatly dimmed the outlook for German businesses. The survey declined to 101.3 from 103.5 in May as inflation has become more of a challenge, as it continues to weigh on consumer spending and increase input costs. Record oil prices which have risen to as high as $140 a barrel, have continued to squeeze company's margins. Meanwhile, Europe's manufacturing and service industries contracted sending the PMI composite reading down to 49.5 from 51.1 in May. The manufacturing index declined to 49.1 in June from 50.6 in May and the services index dropped to 49.5 from 50.6. The entire economic region is facing the same issues as German companies in rising inflation and the declining demand for exports due to a strong Euro. The ECB is expected to increase rates in the near-term as they stick to their mandate of price stability as inflation has risen to 3.7%- the highest in sixteen years. However, the slowing growth in the region may prevent the central bank from embarking on a series of rate hikes.

EUR/USD: Are European Businesses As Optimistic As Trichet? Probably Not

Source: Daily FX

Sentiment amongst German businesses is likely to turn more pessimistic in June, according to the IFO survey. The figure is scheduled to be released at 04:00 EDT, and this release tends to be a significant market-mover for the EUR/USD pair on a very short-term basis. Given the surge in oil, broad indications of mounting inflation pressures, slowing in the Euro-zoneʼs economies, and the European Central Bankʼs staunchly hawkish bias over the survey period, the IFO reading is likely to fall in line with - if not more than - expectations. Furthermore, we saw that last weekʼs ZEW survey of German financial analysts slipped more than anticipated, weighing the risks for the IFO survey further to the downside. However, at the same time, the preliminary reading of the Euro-zoneʼs purchasing managers index (PMI) for the services sector will be released. The index is expected to ease slightly lower to 50.5 from 50.6, but the key here will be to see if it is above or below 50, as the former will indicate expansion in the sector, while the latter will signal contraction. The Euro-zone service PMI has barely managed to hold above 50 since the beginning of the year, suggesting that weakness in the sector will likely weigh on expansion as a whole throughout the region. Nevertheless, the German IFO survey will likely have the greatest impact on the European markets on Monday morning, unless PMI services misses forecasts by a wide margin.

Euro Can't Hold 1.5500 As Currencies Look For Direction

Source: Daily FX

A very quiet meandering night in the currency markets with EURUSD continuing to consolidate around the 1.5500 level in a now very familiar fashion. With economic calendar for the day virtually empty, order flow and a smattering of central bank commentary were the primary factors driving trade.

ECB Member Jorgen Stark noted that the 3.7% inflation level was 'may be unacceptably high' stoking hopes of euro bulls that a rate hike may be coming in July. However, as we noted yesterday the inflationary numbers from all the G-11 nations are elevated strictly because of oil prices with core readings considerably more muted. If oil prices recede from their Olympian highs much of the impetus for the rate hikes may disappear.

In the meantime the ECB will meet a tremendous amount of institutional opposition from the EZ business sector which is already feeling the negative effects of tighter credit. Today's weak construction PMI numbers which showed a decline of -2.4% on a year over year basis is just the latest data point to suggest that growth in the 15 member union is decelerating rapidly.

In UK the release of the BoE minutes provided little surprise with members voting 8-1 to keep rates steady as the lone dove David Blanchflower opted for a 25bp cut. Cable found temporary strength in the following passage 'For some members, news had been sufficient to consider whether an immediate rise in Bank Rate was warranted. If there were a serious threat to medium-term inflation expectations then a pre-emptive rise in rates would be appropriate. Delay would only increase the eventual costs of bringing inflation back to target, ' but the rally soon fizzled as MPC members noted that there were also arguments against the hike. In short, the market concluded that the BoE will remain stationary for the time being with danger to the downside still the more likely outcome if economic conditions in UK deteriorated further.

In North America today, the data calendar only contains MBA mortgage approvals, leaving currencies at the mercy of macro factors such as stocks and oil and unless there is tremendous volatility in those markets, the listless trading of Asia and Europe should continue into the US open.