Data Beat Goes On As Calendar Year Winds Down

December 9, 2008

A new calendar day for foreign exchange traders begins each day in Asia, where Japanese machinery orders and corporate goods prices will be released Wednesday morning local time and this evening for U.S. investors. Core private domestic machinery, a leading indicator of business investment, plummeted 35.6% at an annualized rate in the third quarter despite a 5.5% rise in September. October figures will see the resumption of a pretty steeply sloped decline. Officials expect foreign orders for Japanese machinery to plunge over 40% in the final quarter of 2008. Corporate goods prices, a gauge of wholesale price inflation, posted on-month drops of 0.6% in September and 1.6% in October. November’s fall should be similar to Octobers and depress the 12-month pace to about a third of the 7.4% rise recorded in the year to August, as this index is very sensitive to falling commodity prices.

The first of many monthly Chinese indicators, including PPI and trade, are expected to get released this evening. China is facing weakening demand for its exports, and domestic demand is softening too as a result.

European releases on Wednesday will include French, Italian and Swedish industrial production for October, which will likely show decreased activity, revised Italian third-quarter GDP growth (-0.5% not annualized was the preliminary indication), Norwegian consumer prices and an estimate from the NIESR of British growth over the three months to November.

In the Western Hemisphere, Canada reports quarterly productivity and unit labor costs, while a significantly larger U.S. budget shortfall will be reported for November. A Brazilian central bank policy meeting is not expected to begin reducing interest rates.

The dollar currently shows a loss of 2.3% since the end of November against the euro, which is threatening to move back above the $1.3000 level. Since the euro’s inception, the dollar has on average declined against the common European currency by 0.9% during the first half of December. The two biggest dollar declines in 1H-DEC were drops of 2.8% in 2002 and 2.5% in 2003, but the U.S. currency recorded advances of 1.2% in the first half of December 2006 and of 1.4% in the first half of December 2007. From 1973 until 1998, the dollar on average dipped by 0.2% against the mark during the first half of December. A more pronounced seasonal bias occurs in the second half of December, when the dollar on average fell by 0.9% against the mark from 1973 to 1998 and by 1.2% on average against the euro from 1999 to 2007.



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