Talking Points<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
· AUD Skilled Vacancies jump suggesting labor remains tight
· EUR Italian job picture improves
· GBP Distributive Trades rise markedly, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK consumer strong
· USD only MBA data on calendar
A relatively news free day in the currency markets but the euro continued to lead the charge against the dollar as the pair tested the 1.3250 level in late Asia trade before hitting resistance. As the market begins to appreciate the strength of the Euro-zone recovery, the unit continues to attract capital especially in relation to the yen. Tonight EUR/JPY set yet another all time high of 156.41 as divergent expectations of growth and interest rate policies between the two regions continue to create a one way trade in the pair.
Yesterdays strong IFO numbers were echoed today by better than expected Italian employment data which showed unemployment dipping below 7.0% to 6.8%. The fact that Italy, long considered the sick man of Europe by most market participants, has just registered its lowest unemployment reading in more than 15 years is a sign that the pick up in Euro-zone growth is expanding beyond just Germany and should provide even more support for ECBs staunchly hawkish stance.
Meanwhile, in UK the news was also positive as CBI Distributive Trades survey a measure of UK retail activity printed far better than expected recording a reading of +25 versus -5 expected. The result was the best reading in 2 years indicating that UK consumer sector remains quite strong and although the latest minutes from the MPC show a 9-0 vote in favor of keeping rates steady, additional evidence such as tonights data may prompt the BOE to reconsider it position and hike rates another 25bp in early 2007. In short tonights data from across the pond remains supportive of the dollar bears argument that the rest of the world could successfully decouple from the slowdown in US growth.
