Rational FX: EU Consumer confidence at lowly -11 [07/01/2011]

Yesterday’s Market Movers

• PMI come out slightly worse than expected having little effect on the market however any figure below 50 is negative and shows there is a lack of confidence in the UK services sector. When looking at December period for PMI you would expect that this figure would be higher because of the festive season, however with the bad weather this would have affected the amount of orders placed.
• EU consumer confidence also came out worse than expected at -11 this shows that the everyday spender in the EU is still wary of spending. This is an inflation figure and is quite strange that the figure is worse as usually at this time of year we would expect figures to be positive. This could be due to weather conditions as well as less orders are being made.
• EU Retail sales came out worse than expected mom and YoY, this figure alongside consumer confidence shows that the EU economy could see deflation as no one is spending their money. Deflation would be just another problem in the list of troubles that the EU currently has.
• German factory orders came out much better than expected at 5.2%, this was a huge improvement however this had no effect simply because of the strength we are seeing currently from the USD.
• US weekly jobless claims came out higher than expected, this obviously has a negative effect on the US economy as the government are spending more on the benefits being claimed.  This means that disposable income in the economy is less, having an effect on inflation because there isn’t money being spent in the economy.

Today’s Market Movers

• The First piece of data in the UK today is Halifax house price figure which is an indicator for inflationary figures, this is expected to come out worse than previous, we could see the pound weaken of this figure because it could shows that first time buyers are struggling to get on the property ladder, is this due to high inflation?
• Germany trade balance is expected to come out better than previous, this is the balance between imports and exports in Germany, and a positive figure shows a trade surplus, meaning that there is positive growth in the trade balance.
• EU GDP is expected to come out at 0.4% which is slightly less than the 1.0% that came out last quarter, based on the bad weather we saw last quarter it is expected that growth could slow down slightly mainly for retailers, however manufactures had no problem producing. This is another figure that could see inflation come down because with less growth in the economy, there will be less money flowing around the economy keeping prices low.
• EU unemployment rate is expected to come out the same as previous; this figure shows the number of unemployed workers, this is a leading indicator for the European economy. This means there will be less disposable income in the economy once again leading to inflation figures being low, will we see deflation in the EU?
• EU industrial production figure is expected to come out worse, this measures German factory mine orders.  It’s an inflation figure as it measures the strength of manufacturing in the EU
• In the US we have the Non Farm Payroll figure; this is a very important figure as it measures the amount of jobs created in the US at present. Following on from the ADP figure which came out much better earlier this week; we could see Non Farm increase on the back of this. This also measures inflation, and as there are more jobs available we could see more consumer spending due to people having more disposable income, this could lead to a rise in inflation.
• Also in the US today we have the Unemployment rate which is linked to Non Farm payroll; it is expected to come out better and this could continue Dollar strength.
• The Federal Reserve in the US; Ben Bernanke will be commenting on the USD and the economy, we could see him making positive comments as the Dollar is it has been trading stronger in the recent few weeks. If Nonfarm payroll figures come out better than expected, we could see Ben Bernake mention that in the long term there are more jobs being created and there could be more money being spent in the economy. More orders and more consumers spending in general. This could add strength to the US Dollar.