US Dollar (USD):
Dollar reigned supreme over the majors, especially against sterling on better-than-expected US data and a Wall Street rally.
US October existing homes sales rose 6.1% to 5.77 million units versus 5.4 million units in September. US Q3 GDP growth was revised up to annual rate of 4.0% from 3.1%, above expectations for 3.8%. Consumer confidence index rose to 84.1 in November from 79.4 in October. US durable goods orders rose 2.8% in October versus a revised 4.6% decline in September. Finally, the November Chicago purchasing managers' index jumped to 54.3 from 45.9 in October.
The Dow Jones index closed the week 92 points up at 8896 while the Nasdaq index ended 10 points higher at 1478.
Euro (EUR) – (O-0.9967 H- 0.9967 L- 0.9879 C- 0.9949):
Euro fell quite sharply during the week below the 0.99 support amidst weak data from Eurozone in addition to the upbeat US data. Lower inflation increased hopes of a rate-cut. However, the euro recovered on short covering ahead of a barrage of US and Eurozone data and the ECB council meeting this week and ended the week only marginally lower.
Germany November IFO Business Sentiment fell to 87.3 from 87.7, but better than the expected 86.8 forecast. Eurozone Sept current account suprlus fell to 8 bln, down from 9.7 bln last month. and Investment inflow is up to 15.8 bln from 4.5 bln in Aug. German December GfK Consumer Sentiment Indicator fell to 5.5 vs. revised 6.0 in November, a six-year low. Italy Nov business confidence rose to 95.4 from a downwardly revised 95.2 (prev 95.3). European consumer confidence fell to the lowest in more than five years in November to minus 14 from October's minus 12. ECB's Solans mentioned that Eurozone inflation is on a general downtrend and should fall below 2% in 2003. He further stated that growth will pickup next year and reach its potential by the end of 2003.
UK Pound (GBP) – (O- 1.5775 H- 1.5786 L- 1.5419 C- 1.5573):
The pound was a major loser this week falling almost 400 pts. The fall was triggered due to downward revision of growth forecasts.
UK Q3 GDP growth was revised up to 0.8% from a preliminary 0.7%, while annual growth edged up to 1.8% from 1.7%. In his pre-Budget testimony before Parliament, UK Chancellor of the Exchequer Gordon Brown unveiled higher government borrowing measures and downwardly revised growth forecasts. To plug a shortfall in tax revenues, the government plans to increase borrowing to 20 billion GBP from a previously estimated total of 11 billion GBP. Brown produced a lower forecast for economic growth, revising 2002 growth to 1.6% from 2-2.5% and 2003 growth to 2.5-3% from 3-3.5%.
Japan Yen (JPY) – (O- 122.87 H- 123.18 L- 121.36 C- 122.51):
Yen initially strengthened against the greenback but lost ground towards end of the week as economic data re-affirmed deflation.
Japan October Nationwide Retail Sales are down 2.8% (prev -3.8%). Japan Oct Customs-Cleared Trade Surplus is up 95.6% y/y. The total combined amount of non-performing Loans held by Japan`s major banks as of the end of the first fiscal half through September 30 fell 10.1% from the end of fiscal 2001 to 24.4 trillion yen. Unemployment rate is at a record high at 5.5 percent in October, up from 5.4 percent in September, while industrial output unexpectedly fell a preliminary 0.3% m/m in October against an expected rise. Deflation also persisted, with the national core consumer price index, which excludes volatile fresh food prices, down 0.9 percent in October from a year earlier, the 37th straight month of decline. BoJ Governor Hayami mentioned that he was cautious about causing the yen to weaken to overcome deflation and it is hard to artificially manipulate currencies and it would have to be taken into account the impact on other countries and trade. Hayami also stated that Japan should maintain its strong currency and economy.
The Nikkei index ended the week at 9215 up 443 pts.from previous week`s close.
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Source: Mecklai Financial Services
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