The fundamental news on the economic calendar started early this morning with French consumer spending coming in better than expected at 1.1% against a target of 0.2% with a report showing an increase in demand for both clothing and cars suggesting the combined effect of slowing inflation and government incentives are beginning to have an impact.   This was followed by the German IFO report which again was better than forecast and came in at 83.7 against a forecast of 82.4.  The IFO is a survey of around 7000 businesses and is highly respected due to its large sample size, and is generally considered a leading indicator for the current economic situation.  As a result the euro gained against the US dollar in early trading.  This afternoon’s focus switches to the US where we start with Durable Goods Orders both the core numbers and the broader number.  The core figures exclude major transportation items such as aircraft and measures the total value of new purchase orders placed with manufacturers for durable goods during the period.  The forecast is for -1.2% against a previous of +3.7% so we are expecting a fall this afternoon.  However, the actual is better than forecast then this is considered positive for the US dollar.  The Durable Goods Orders are expected to show a similar picture with a forecast of -1.4% against a previous of +3.5% and again if the number comes in better than expected this should be good for the US dollar.  These releases are followed 90 minutes later by New Home Sales which is the annualized figure for new homes sold during the previous month and this is expected to show a small increase to 340k from 337k the last time.  The figure is important as any up turn in this sector has a wide reaching ripple effect throughout the remainder of the economy and once again if the numbers come in better than expected we could see a positive reaction in the US dollar.

Of much more importance are 3 other items of fundamental news which are as follows: First we have the G7 meeting of Finance Ministers in Washington.  Second there is a suggestion that a white paper detailing the parameters of the stress test for banks will be released later today.  The paper will outline the methodology proposed and will also serve as a guide for interpreting any results.  Finally we round off the week with yet another speech from US Treasury Secretary Geithner who is due to hold a press conference following the conclusion of the G7 meeting.  As this is likely to happen after the markets close we could see a reaction on Sunday when the currency markets reopen.

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