Talking Points
· NK readies a long range missile test
· Fukui in trouble?
· EZ Trade Balance widens more than forecast
· US only Fed speak op tap
News that <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />North Korea may test a long range Taepodong-2 ballistic missile its first such move since 1998 created concern in the FX market as traders flocked to the safety of the greenback amidst rising geo-political tensions in the Pacific. Prime Minister Koizumi used harsh diplomatic language in trying persuade the North Koreans to stand down. I still hope North Korea will not do so, but if they don't listen to us, if they fire a missile, Japan will have to take severe action in discussion with the United States,' he told a press conference.
In addition to the unexpected political crisis, the yen is pressured by the expanding scandal over Governor Fukuis investment in a fund run by shareholder activist Yoshiaki Murakami who was arrested on suspicion of insider trading, Though Mr. Fukui himself is not implicated in the investigation in any way, the fact that he did not liquidate his investment as soon as he became BOJ Governor is viewed askew by many in Japan. A poll taken over the week-end suggests that nearly 50% of respondents believe he should resign.
Therein lies the danger to the yen. If Mr. Fukui is forced to leave office, control of Japanese monetary policy will be unclear. Mr. Fukui is widely respected in the FX markets and his departure could weigh heavy on the yen as market participants take some time to acclimate themselves to a new BOJ leader. The Fukui matter may yet turn out to be a tempest in a teapot, but for now it presents a tangible risk for yen longs. At 115.00 and above USD/JPY clearly appears overbought. However with US rates certain to move to 5.25% by end of this months while the status of ZIRP remains unclear as Governor Fukui struggles to justify his actions, yen longs face many tough obstacles on the their way to a rally.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
FX Upcoming
| Currency | GMT | EST | Release | Expected | Prior |
| CAD | 12:30 | 8:30 | International Securities Transactions (APR) | C$3.000 | C$3.325 |
| CAD | 12:30 | 8:30 | Wholesale Inventory (APR) | 0.1% | -0.3% |
| CAD | 12:30 | 8:30 | Wholesale Sales (MoM) (APR) | 0.4% | 0.8% |
| Currency | GMT | Release | Actual | EST | Previous | Comments |
| GBP | 23:01 | Rightmove House Prices (MoM) (JUN) | 0.8% | 0.8% | 2.0% | Fifth straight month of higher asking prices, although pace is leveling off |
| GBP | 23:01 | Rightmove House Prices (YoY) (JUN) | 6.4% | 6.5% | 5.9% | |
| JPY | 5:30 | Tokyo Dept. Store Sales (YoY) (MAY) | -0.3% |
| -0.5% | Domestic demand is still struggling to pick up, likely delaying rate hikes. |
| JPY | 5:30 | Nationwide Dept. Sales (YoY) (MAY) | -1.1% |
| -0.6% | |
| CHF | 7:15 | Industrial Production (QoQ) (1Q) | -1.9% | -3.8% | 7.1% | The drop-off from last quarters five year high in industrial production was much less than anticipated |
| CHF | 7:15 | Industrial Production (YoY) (1Q) | 9.2% | 7.0% | 4.1% | |
| EUR | 9:00 | Euro-Zone Trade Balance (APR) | -2.0B | -1.3B | 0.6B | Slightly steeper drop, though less when considered against revised March total |
