Euro Surges On 16-Year High Inflation

It was a breakout rally waiting to happen for the past few weeks in the forex markets. The Euro surged to another record high against the US dollar Wednesday, finally breaking past 1.5920 to a high of 1.5970, exceeding initial bull target around 1.5950, and looks set to target 1.6000 and beyond anytime soon. What propelled the Euro higher today was the European inflation report which showed that inflation rate accelerated to 3.6% last month, the highest in almost 16 years. For those who have been calling for an ECB rate cut, this data is evidence that the ECB officials just couldn’t afford to do that. Even ECB’s Juergen Stark said yesterday that interest rates at a six-year high of 4% may not be high enough to combat inflation. Euro also rose to an all-time high of 0.8080 against the British pound following the data release.

Bad News For US Construction

Home construction in the US are continuing their downward slide as data today shows US housing starts fell more than double the forecast in March to a 17-year low. signaling that declining construction will keep eroding economic growth this year. Starts were projected to fall 5.2% to a 1.01 million, but work only began on 947,000 homes at an annual rate, which was a 11.9% decrease from February. Building permits, an indication of future construction, fell to a 927,000 rate from 984,000 the prior month. Potential home buyers in the US must mostly be bidding their time, waiting for house prices to fall further before they buy a house. What incentive is there for property developers to build new homes when there is such a huge inventory of unsold homes on the market?

Other Data

US consumer prices rose 0.3% in March from the previous month, and excluding food and energy costs, prices increased 0.2% - in line with forecasts. Meanwhile, US industrial production in March rose the most since November, increasing 0.3%, following a revised 0.7% fall in February that was bigger than previously reported.

Thursday:

Swiss retail sales 0715 GMT

Eurozone trade balance 0900 GMT

Canada CPI 1100 GMT

US initial jobless claims 1230 GMT

US Philly Fed 1400 GMT

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