The market wiles away the hours till dawn doth comethReleases from Europe:
March Forecast Actual
German WPI (MoM) +0.5% +1.6%
German WPI (YoY) +6.0% +7.1%

German wholesale prices confirm no let up in inflationary pressures. This is something central bankers say are temporary but have an underlying upward trend that doesn’t look exhausted. The ECB will remain therefore between a rock and a hard place with interest rates set to remain firm for some months to come.
Europe has taken over from Europe and without too much surprise has sold into the overnight recovery in the Dollar. It doesn’t surprise but whether it makes it to yesterday’s lows is doubtful as the market awaits stronger signs from G7.

The following economic releases are due today:
March
U.S. Import Price Index (MoM) +1.9%
U.S. Import Price Index (YoY) 13.6%
April
University of Michigan Confidence 69.0

"The time has come," Paulson said,
"To talk of many things:
Of recession and growth and inflation
Of cabbages and kings
And why the credit market is boiling hot
And whether central bankers have wings."
Stagflation? Who mentioned stagflation?
And the next question is whether the “S” word will be uttered at all at the G7 meeting. To be honest it’s probably a bit early. Maybe not. Already the FOMC is conceding that H1 will see contraction. The IMF forecast the entire year to be soft.
House prices remain soft and inflation remains uncomfortably high. OPEC countries are squeezing every cent they can from dwindling oil resources and farmers are milking the benefits of growing crops to be used as alternative fuels which will keep food prices elevated for some while to come.
So do finance ministers and central bankers really have the resources to control these issues? Clearly not and this reduces their capability to cope with the global economic environment as it stands now. The risks remain high.
And what will G7 say, or perhaps do?
The chance that Juncker’s pressure on President Bush over tea and cakes on Wednesday will actually amount to anything but the usual bland statements is very high. They talk of exchange rates reflecting economic fundamentals but definitions of economic fundamentals can vary between people and institutions. For example, the IMF still feel the Dollar is over valued.
A market is all about whether people want to own something. If they don’t want to own it, then they sell it and the resultant supply and demand causes prices to move. That’s fundamental. A central banker can’t force them to own something they don’t want…
If they suddenly find out they were wrong then the market will adjust very quickly. At the moment there is nothing to suggest that anyone really wants to own Dollars…

Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 102.93-25 1.5943-86 1.0125-51 1.9842-48
Res: 102.24-45 1.5860-12 1.0060-90 1.9770-90
Spt: 101.33-58 1.5755-00 0.9933-66 1.9694-04
Spt: 100.72-03 1.5693-24 0.9846-70 1.9605-46
See Also