Up a bit … stop… down – down a bit … stop… up … stop… down... stop …European releases from Friday:
March Forecast Actual
Swiss Adjusted Retail Sales (YoY) +3.0% +9.7%
Italian Trade Balance (Total) EUR - 860mn - 545mn
Italian Trade Balance (EU) EUR +377mn +667mn

States releases from Friday:
April
U.S. Housing Starts 935K 1032K
U.S. Building Permits 910K 978K
U.S. University of Michigan Confidence 62.5 59.5

European data of Friday were pretty innocuous though the Italian trade numbers were actually quite positive. It didn’t prevent the ECB’s Constancio from mulling over how much the European economy will decelerate though emphatically stated that there is no risk of recession.
However, to beat a dead horse the lack of understanding what high inflation can do was highlighted by Liebscher who was bemoaning inflation at 3% and obviously considers that current interest rate levels are at levels to “maintain price stability.”
Let’s step back and remember the last time the ECB changed rates was around the time that the subprime woes began. During that time growth has moderated slightly so there has really been no demand led inflationary pressure. However, inflation has steadily risen.
If current interest rates have had no impact on the rise in inflation then any suggestion that they will prevent the steady rise in oil and food prices further, and thus inflation, then one must question Liebscher’s credibility.
If he says this rise is merely temporary then he should recall the same statements 7-8 months ago.
And the U.K.’s Telegraph newspaper recognized the impact that it could have on consumers. They “advised” the BOE to “abandon inflation target or crucify consumer.” The CB Governor King hinted at just that in his quarterly inflation bulletin last week. Perhaps the ECB did not read the newspapers.
Consumers may bite their tongues for this year but inflation continues to eat away their spending power then the odds are high that the winter will be one of industrial disputes and higher wage settlements that will drive inflation further higher…

Interestingly the U.S. Treasury Secretary Paulson chose his words carefully on this subject. In fact, he avoided mentioning the “I” word. In line with his “always say something positive” style he concentrated on the fact that the credit crisis is beginning to have less impact on the markets.
“I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions, and specifically, by the recovery of the housing sector,” he said to press home that Friday’s housing stats were positive for the first time in months.

However, in spite of the positive housing numbers the Dollar actually lost ground late on Friday in line with forecasts over the past few days. Yep, the housing data was good but it doesn’t drive the market right now. Yep, market comments were positive for the Dollar but the rest of last week’s numbers weren’t quite so shiny.
There is no drive to sell Dollars any more, but then there is no drive to buy either and this could well be the pattern of trading for the coming month. As we move through to the end of May and into June the greater risk is for more volatility to economic releases from both Europe and the States which will keep the Dollar on a rather erratic path but with a downward bias.
Tomorrow sees the German ZEW and Wednesday the German IFO survey which are more likely to be soft than not. Wednesday also has the FED releasing the minutes of the April 29th-30th meeting which will undergo the usual scrutiny in an attempt to outguess the Fed.
Otherwise it’s the usual manufacturing, inflation numbers which should be erratic but ending in the May advanced manufacturing PMI numbers from Europe.
Best strategy for the week is to play ranges and look for short term trades. No trend is likely to develop.

More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia Prior
April Preliminary BoP Imports (MoM) +1.0%
Japan – April
Tokyo Department Store Sales (YoY) - 0.7%
Nationwide Department Store Sales (YoY) - 1.2%
U.K.
Rightmove House Prices (MoM) - 0.1%
Rightmove House Prices (YoY) +1.3%
See Also

Retrouvez d'autres analyses sur les devises dans la rubrique analyse forex du site Trader-Forex.