Market Review April 16 2012
Economic events scheduled for today
08:15 CHF PPI (MoM) 0.5% – 0.8%
The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation.
13:30 USD Core Retail Sales (MoM) 0.6% – 0.9%
Core Retail Sales measures the change in the total value of sales at the retail level in the U.S., excluding automobiles. It is an important indicator of consumer spending and is also considered as a pace indicator for the U.S. economy.
13:30 CAD Foreign Securities Purchases -4.19B
Foreign Securities Purchases measures the overall value of domestic stocks, bonds, and money-market assets purchased by foreign investors.
13:30 USD Retail Sales (MoM) 0.4% – 1.1%
Retail Sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
13:30 USD NY Empire State Manufacturing Index 21.1 – 20.2
The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening
Euro Dollar
EURUSD (1.3160) The euro continues to show resilience in the face of a challenged outlook, entering the NA session in the mid 1.31s. A dovish Fed has helped support EUR, even as European bond markets suggest building stresses and the Spanish IBEX has dropped to an almost four year low.
Today, the Bank of Spain released their March statistics, which showed that the ECB increased its lending to Spanish banks from €152bn in February to €228bn in March, a new record. Suggesting that the banking system remains vulnerable and that if any of these loans were used to buy Spanish sovereign debt the increase in yields will be generating mark to market losses. Do not expect EUR to collapse lower, supported by a limit to how much the USD can rally without stifling the US recovery, elevated oil prices and the importance of having a reasonably stable currency to entice foreign investment The euro is trading higher and its currently above1.3170 levels.
Looking ahead for the day, German Final CPI m/m which is expected to be Neutral. Support is seen at 1.3000 levels while strong resistance is seen at 1.3210 levels (21 and 55 days daily EMA). Medium Term Bearish Target 1.3000 levels again.
The Sterling Pound
GBPUSD (1.59.53) The cable is trading strong vs. the greenback on the back of slight risk sentiment and positive BRC Retail Sales Monitor y/y data yesterday. Support is seen at 1.5882 levels (21 days daily EMA) while resistance is at around 1.5965 levels. Exporters cover GBP/USD pair on upticks. GBP/INR is at 81.83 levels. Maintain Medium term Bearishness. Target 1.55 levels again. Exporters cover GBP/USD pair at current levels.
Asian –Pacific Currency
AUDUSD (1.0407) The Australia dollar is underperforming, down 0.2% vs the USD while retaining most of the strength provided by yesterday’s 1.3% rally. The decline is likely a reflection of the shift in drivers of Chinese growth away from commodity intensive investment toward domestic consumption, although renewed expectations of looser RBA policy are also likely providing for downward movement. Weakness has driven AUDUSD back to the 200 day MA (1.0381), a level of congestion from late March and early April.
USDJPY (80.98) The Japanese yen is flat from yesterday’s close despite FX performance that is suggestive of risk aversion, an indication that market participants are beginning to believe in the increasing possibility of further BoJ easing at the upcoming meeting on April 27th. Movement since Tuesday’s BoJ meeting has been limited, with USDJPY consolidating between 80.50 and 81.20, despite a generally risk on market tone and dovish central bank commentary that would have been expected to provide for a stronger rally.
Gold
Gold (1668.65) fell after posting almost one percent rise in the previous session. Bullions have already digested the news of contraction of the Chinese economy in the first quarter of 2012 and better than expected outcome for the Italian bond auction. Chinese GDP expansion eased to 8.1 percent compared to the last quarter’s 8.9 percent. At the same time investors keenly watch the outcome of the Federal Reserve Chairman Bernanke’s speech as he bypassed monetary policy and economics. Inflation rates in the US continued to climb.
Crude Oil
Crude Oil (102.97) Commodities markets saw a positive session on Thursday and posted relatively strong gains across the board. Despite the fact that both EIA’s and IEA’s monthly reports showed that the market tensions are easing, Brent crude closed only slightly below 122 USD per barrel level. Regarding the OPEC Monthly Oil Market Report, the cartel left its forecast for world oil demand growth in 2012 unchanged for a second month. Interestingly, in a move towards greater transparency, the cartel decided to publish figures on its oil production as submitted by the member countries along with numbers estimated by “secondary sources” (previously, OPEC published estimates based only on “secondary sources”).
There are some interesting differences between the two sources. For example, although the “secondary sources” said that Iran’s production fell by about 0.3 million barrels per day (mbpd), the country itself reported a more or less standard production of 3.7 mbpd. On the other hand, as far as the Saudi Arabia’s production is concerned, the difference between the sources is relatively small (official figures are by about 0.1 mbpd higher on average so far in 2012). Meanwhile, Saudi’s oil minister Naimi said that his country was determined to bring oil prices down.
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