Euro Breaks Out on Snow Speculation

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·          <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Japan Job to Applicant Ratio higher

·          EZ M3 growth rate confirms need for rate hike

·          Evans in Snow Out?

·          US Consumer Confidence on Tap

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The EUR/USD rose above the 1.2850 level in early European trade today spurred by speculation that Don Evans, the former Secretary of Commerce may be the new replacement for the Treasury Secretary John Snow. The FX market tends to divide the Secretaries of Treasury as industrial or financial types.  Donald Regan and Robert Rubin both came from the financial sector and presided over periods of dollar strength which was beneficial to US capital markets. Whereas Former Secretary Paul ONeil, current secretary John Snow and Mr. Evans (who hails from the oil and gas industry) are all viewed as industrial Secretaries of Treasury favoring a weaker dollar which in turn is of great help to  the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US manufacturing sector.

Speculation on Bush cabinet changes aside, the EUR/USD is also getting a lift from firm Euro-zone data which included yesterdays sharp rise in German consumer confidence and todays faster than expected growth in M-3 money supply.  The money supply figures conform the need for aggressive ECB action to curtail the inflationary pressures building up in the system.  Todays US Consumer Confidence reading may push the pair higher yet, if as expected the number registers a sharp drop to 100 from prior months reading of 109.

Meanwhile in Japan today the data was relatively mixed, although the overall tone still suggests a bullish path as jobless rate remained at 4.1% with Job to Applicant ratio rising to 1.04. The news bodes well for future consumption trends in the Japanese economy as the prospect of more jobs and higher wages should continue to fuel the economic recovery. Other data printed slightly below forecast Industrial Production, Small Business Confidence and Overall Household spending all missed their marks. Nevertheless none of the results were materially weak and suggest more of pause in growth cycle, most likely caused by the appreciating yen, rather  than any structural problem within the economy itself.

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