12.09.2008 12:08

FOREX. Thursday summary

The dollar rose to one-year high against the euro on signs global growth is slowing and the yen strengthened on speculation investors will sell higher-yielding assets funded by loans in Japan.

The yen appreciated to the highest level against the euro since August 2006 as concern Lehman Brothers Holdings Inc. will collapse encouraged investors to pare carry trades.

New Zealand's currency dropped to two-year lows against the dollar and the yen as the Reserve Bank reduced borrowing costs more than most economists forecast.

The ECB will cut its main refinancing rate by a quarter- percentage point to 4 percent during the first three months of next year, according to a surveys of economists.

The European Commission said yesterday the euro region's economy will probably stagnate this quarter after shrinking the previous three months for the first time since the currency's debut in 1999. It cut its 2008 growth forecast to 1.3%, from 1.7%.

Italian industrial production data for July is due at 0800GMT, before the 0900GMT release of Eurozone Q2 employment and July industrial production data. Employment is seen rising 0.1% q/q sa, 1.1% y/y, while expectations are for a decline in IP data by -0.1% m/m, -0.6% y/y.
US data at 1230GMT sees retail & food sales as well as the Producer Price Index for August. Retail sales are expected to rise 0.3% in August, as industry motor vehicle sales improved in the month, particularly light truck sales. Gasoline prices retreated modestly and same-store sales were soft relative to past back-to-school buying periods, so non-auto retail sales are expected to fall 0.2% in the month. Meanwhile, the PPI is expected to fall 0.5% in August after strong gains in the previous three months. Energy prices are expected to be a bit more tame after brisk increases in previous months, but food prices are forecast to post another increase. Core PPI is forecast to rise only 0.2% on increased dealer auto incentives after the outsized July gain.
At 1355GMT, the Reuters/University of Michigan Consumer Sentiment Index is expected to rise to a reading of 64.0 in early-September. Gasoline prices continued to retreat, but other economic conditions also deteriorated. At 1400GMT, business inventories are expected to rise 0.5% in July, with factory inventories already reported up 0.5%. Retail inventories are expected to be soft due to a brisk rebound in auto sales.