Data both sides of the Atlantic continue to be erraticReleases from Europe:
Forecast Actual
April Swiss UBS Consumption Indicator 2.249 (prior) 2.179
May Italian Business Confidence 86.9 89.6

Poor consumer numbers have spread Europe-wide while business confidence is mixed. However, the core requirement for business confidence is a freely spending consumer. Hence we can dismiss business confidence as flying in the face of reality.
ECB officials are, at last, admitting that growth is suffering (cue another GDP downward revision) and Weber says he “wouldn't expect these spreads to come down to pre-summer 2007 levels any time soon.”
Given the confrontational stance by central banks in calling for rate hikes should workers try and recover their lost earnings to the oil & food coffers there seems more chance that the coming 12-18 months will be long hard fought battles in which the only loser will be the stability of the underlying economies.
He also spoke rather patronizingly about the market which he said “have understood that we do not like disorderly developments in currency markets and that we think that high volatility on forex markets is counterproductive. What we have seen in recent months demonstrates that.”
However, he calmly ignores the fact that markets react to events and central bank actions. This is a fundamental error in misunderstanding the core mechanism of markets by expecting mass psychology to bow down and obey the “rules” set by central bankers. It could, in the long run, contribute to a greater deterioration in the underlying economy.

Releases from the States:
April Forecast Actual
New Home Sales (MoM) +0.1% +3.3%
New Home Sales 527K 526K
May
Consumer Confidence 60.1 57.2
Richmond FED Manufacturing Index 0.0 - 3.0
Dallas Fed Manufacturing Index - 23.4 (prior) - 10.2
Stateside the new home sales number looked spectacular at +3.3% MoM but given the annual pace at 526K it hides the equally drastic revision lower by 17K in March. Net the figure was about as expected.
The Richmond manufacturing index saw a dip to -3.0 while the Dallas Fed saw a solid rise to -10.2. One positive number was the rise in CAPEX in Dallas and the better outlook.
As I’ve said in the past, we are probably seeing a basing effect in the economy which will bring volatile numbers and slowly this will create a modest improvement. However, given the continued softness in consumer confidence a “modest improvement” is all we can probably expect.
Equally Europe is also going through a period of volatile numbers but officials are less attentive to the abnormal background events. As the ECB slowly squeeze the life out of its own economy there differential will gradually turn to favor the Dollar.
So the net impact of yesterday’s figures was a higher Dollar again. We should be expecting a significant Dollar low very soon. I am not convinced that we have seen it just yet and suspect that we will continue to see the market favor the Euro for now once we have seen the end of the current correction.
There’s not a great deal of critical data out today and this should therefore stall the Dollar’s recovery today and maintain the recent trading range for a little while longer before a final dip to new lows can be expected.

More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
Q1 Construction Work Done +2.3%
March Westpac Leading Index
May DEWR Skilled Vacancies
Japan
May Small Business Confidence
See Also

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