- Mixed, GDP rises less than expected, Chicago PMI & Michigan consumer sentiment beat expectation
- Lower, BOJ steady, economic data mixed, deflationary pressures continue, tracking risk sentiment
- Higher, a Greek rescue package is expected within days, inflation rises fastest since December 2008
- Lower, election uncertainty, selling in cross trade versus the EUR
- AUD & CAD lower, Australian credit demand rises, Carney warns on CAD strength
Overview
The USD traded mixed to lower Friday with EUR supported by speculation that the EU/IMF will announce a Greek aid rescue package this weekend. Report of progress on Greek aid talks helped to narrow Greek credit default spreads and reduces the cost of financing the Greek debt. EUR was also supported by report that EU inflation rose at its fastest pace since December of 2008. CHF traded higher supported by report of stronger than expected Swiss KOF leading indicator. GBP underperformed pressured by UK election uncertainty and selling in cross trade to the EUR. Commodity currencies initially traded higher supported by improving risk appetite and a rally in the price of gold to a new high for the year. AUD was supported by report of rising Australian private sector credit demand. CAD traded lower after the release to today's release of Canada's GDP which came in as expected and in reaction to BOC Governor Carney's statement Thursday that strong CAD and Greek debt troubles may impact monetary policy. JPY traded lower pressured by report that Japan's CPI continued to fall last month and by rising risk appetite sparked by speculation a Greek rescue package will be announced this weekend. US economic data was with mixed with advanced Q1 GDP reported slightly below expectation and Chicago PMI rising more than expected. Michigan consumer sentiment was revised higher. Investors await the details of the Greek rescue package. USD downside was limited as stocks turned lower pressured by selling of financial shares on news of a possible criminal investigation of Goldman.
Focus turns to next Tuesday's RBA policy meeting and Friday's release of US unemployment and nonfarm payrolls for April. The RBA policy decision is a close call but majority consensus is the RBA will hike rates 25bps to 4.5%. The US April unemployment rate is expected unchanged at 9.7% with nonfarm payroll rising close to 200k.
Today's US data:
Q1 advanced GDP rose by 3.2% compared to 5.6% in Q4, a reading of 3.4% was expected. Core PCE index rose by 0.6%. April final Michigan consumer sentiment rose to 72.2, a reading of 71 was expected. Chicago April PMI rose to 63.8, reading of 60 was expected
Upcoming US data:
Next week's US economic calendar includes the May 3rd release of March personal income and consumption, March construction spending and April ISM index. Personal income is expected to rise by 0.3% and personal consumption is expected rise by 0.6%. Construction spending is expected to fall by 0.6% compared to a 1.3% decline last month. The ISM index is expected unchanged at 59.6. On May 4th March factory orders, pending home sales and April auto sales will be released. Factory orders are expected to rise by 0.3% compared to 0.6% last month and pending home sales are expected at 100.8 compared to 97.6 last month. On May 5th April ADP employment and ISM non-manufacturing Index will be released. ADP employment is expected at 25k compared to -23k last month. The non-manufacturing ISM is expected to improve the 56 from 55.4 last month. On May 6th initial jobless claims for week ending 05/01 will be released along with Q1 productivity and unit labor costs. Jobless claims are expected to fall to 442k from 448k last week. Q1 productivity is expected at 2.7% compared to 6.9% last quarter and unit labor costs are expected at -1.1% compared to -5.9% last quarter. On May 7th April nonfarm payrolls and unemployment will be released. Nonfarm payrolls are expected to rise by 175k compared to 162k last week with the unemployment rate unchanged at 9.7%. March consumer credit will also be released on May 7th expected at -2.35bln compared to -11.51bln last.
JPY
JPY traded mixed to lower pressured improving risk appetite sparked by report that a Greek rescue package may be announced this weekend and in reaction to continued deflationary pressures in Japan. EU officials state that rapid progress is being made on a bailout for Greece. The Nikkei closed 132 points higher. Stronger Nikkei and firmer US equity market trade contributes to improving risk appetite. Japan's March CPI declined by 1.2%. This marks the 13th consecutive month of declining inflation in Japan. The BOJ concluded a one-day policy meeting today and elected to hold monetary policy unchanged, maintained current level of special monetary stimulus and pledged to maintain its commitment to easy monetary policy. The BOJ also hinted at possible new efforts to boost the economy with the BOJ considering new economic stimulus measures to help Japan's banks boost growth. In it semi annual economic report the BOJ also suggested that inflation may turn positive forecasting a rise of 0.1% for fiscal year starting April 2011 The remainder of today's Japanese economic data was mixed with April manufacturing PMI posting a rise to 53.5 from 52.4, household spending reported up by 4.4%, and March unemployment ticked up to 5%. JPY direction is expected to trade inversely to equities and risk sentiment. Japan's Golden week holiday starts next week.
Japanese markets will be closed on May 3rd for Constitution Day, May 4th for Greenery Day and May 5th for Children's day. On May 6th Japan's April vehicle sales will be released.
Key technical levels to watch in USD/JPY include support at 92.99 the April 28th low with resistance at 94.78 April 5th high.
EUR
EUR traded higher supported by report of progress on a Greek rescue package and rising EU inflation. The president of the EU commission Barroso said that he expects a rescue package for Greece to be completed within days. The Financial Times reports that Greece has agreed to austerity measures in return for an EU/IMF aid package. Greek five-year credit default swaps declined to 622bps from 670bps yesterday in reaction to Greek bailout hope. EUR gains were limited by report that Moody's downgraded eight Greek banks. EU April inflation rose by 1.5%. This marked the highest level for EU inflation since December 2008. Thursday the EU reported improving business sentiment and a big drop in German jobless claims. The combination of rising EU inflation and improving growth coupled with uncertainty about sovereign debt risk in peripheral European nations complicates the outlook for ECB monetary policy. The ECB is widely expected to err on the side of caution because of concern about the potential drag to the EU recovery from expected austerity measures in Greece and other Southern European nations. It's not clear how much of the relief rally the EUR may experience after the announcement of a Greek rescue package as investors will continue to focus on the risk of contagion of sovereign debt risk in Europe.
Next week's EU economic calendar includes the May 2nd release of April EU manufacturing PMI expected at 56.8. On May 4th EU March PPI will be released expected 0.3% compared to 0.1% last month. On May 5th EU April services PMI will be released expected at 54.4. On May 6th March factory orders will be released expected to rise by 0.5% compared to flat last month.
The technical outlook for the EUR is negative as EUR breaks 1.3200. Expect EUR support at 1.3184 the April 29th 2009 low with resistance at 1.3395 the April 27th High.
GBP
GBP traded lower pressured by UK election uncertainty and selling in cross trade to the EUR. The UK held its last pre-election debate last night and the UK press reports that the opposition party leader Cameron won the debate. Cameron's victory may foreshadow a likelihood of the Conservative party emerging as the clear election winner in next Tuesday's UK election. Investors however remain concerned that the election could end in a hung parliament with no clear winner. A hung parliament would make it less likely that the UK will take quick action to reduce its deficit. If the UK does not take quick action to reduce the deficit the UK may lose its AAA sovereign debt rating. It's hard to see how the threat of a hung parliament has not been discounted by recent weakness in the GBP and what will matter most to investors is what transpires after the election and how the new parliament approaches the need for deficit reduction. Former UK Exchequer Lawson said that failure to take decisive action on the UK budget deficit after the election could cause major problems for the UK financial markets and GBP.EUR/GBP gains were attributed to short covering in the EUR sparked by report of progress on a Greek rescue package. Fears agree that the fault has eased. GBP continues in a sideways pattern as investor's debate the potential impact of the UK election, the UK budget outlook and uncertainty about BOE monetary policy.
Next week's UK economic calendar includes the May 4th release of March money supply, mortgage approvals, consumer lending and April PMI construction. The money supply is expected to rise by 0.3%, mortgage approvals are expected at 49k, net lending his expected 9.3bln and the construction PMI is expected at 53.4 compared to 53.1 last month. On May 5th April PMI will be released expected at 56.7 and 56.5 last month. UK national election will be held on May 6th. On May 7th April PPI will be released expected at 3.8% compared to 3.6% last month. The BOE policy meeting will be delayed until May 10th because of the UK election.
The technical outlook for GBP is mixed as GBP struggles to hold above 1.5400. Expect near-term support at 1.5126 the April 28h low with resistance at 1.5487 the April 27th high.
CAD
Canada' s GDP by industry grew by 0.3% in February, industrial products price index declined by 0.4% and the raw materials price index rose by 0.8%. CAD traded lower after the release of today's data as the reports are unlikely to increase a sense of urgency by the BOC on the need for an earlier rate hike. CAD gains were also limited by statements from BOC Governor Carney before the Canadian Parliament Thursday. Carney said that strong CAD may impact inflation and monetary policy and he expressed concern about possible risks from Greece and rising global debt. Carney's comments may dampen speculation of an earlier BOC rate hike as strong CAD helps to limit inflationary pressures and the BOC may consider global sovereign debt risk as reason to delay a rate hike. Carney also suggested that the BOC is prepared to intervene against excessive CAD strength because strong CAD hurts Canadian exports and may be a drag on Canadian economic growth. CAD price direction will continue to track risk sentiment with gains possibly limited by threat of intervention and BOC policy uncertainty. CAD traded to the day's lows as stocks drop on news of a possible criminal investigation of Goldman. Focus turns to next Friday's release of US and Canadian employment data. Investors will be looking closely at the employment growth component of the Canadian report for clues to the strength of the recovery and to gauge the possible risk of an earlier BOC rate hike.
Next week's Canadian economic calendar includes May 6th release of March building permits expected at 0.7% compared to-0.5% last month. On May 7th April unemployment and employment growth will be released. The unemployment rate is expected at 8.1% compared to 8.2% last month with employment growth at 25k compared to 17.9k last month.
The technical outlook for CAD is mixed as USD/CAD trades above 1.0100. Look for near-term support at 1.0000 the April 27th low with resistance at 1.0302 the March 26th high.
AUD
AUD opened higher supported by improving risk sentiment sparked by Greek rescue hopes and report of stronger private sector credit demand. As noted above, there is diminished risk of an imminent Greek debt default as a Greek rescue package is expected within days. Asian equity markets and commodities rallied in reaction to optimism about a Greek rescue package. AUD was also supported by report of stronger Australian private sector and housing sector credit demand. Australia's March private sector credit rose by 0.5% and the March housing sector credit rose by 0.7%. Stronger Australian credit demand will increase the odds of RBA rate hike at next Tuesday's policy meeting. AUD was also supported by yield outlook as the Fed holds policy steady and the RBA is expected to hike rates next week. The RBA hiked rates by 25bps to 4.25% earlier this month. Thursday Australia reported higher than expected CPI. Australia's Q1 CPI rose by 0.9%. The rise in CPI will increase pressure for the RBA to hike rates next week. The CPI report follows Wednesday's report of higher than expected Q1 PPI rise. Q1 PPI rose by 1%, a 0.6% rise was expected. The higher than expected Australian inflation may increase the chance of an RBA rate hike at the May 4th policy meeting. Focus turns to the next Tuesday's RBA policy meeting. Majority consensus is the RBA will hike rates 25bps to 4.5%.AUD turned lower midsession as US equities were pressured by report of potential criminal charges against Goldman.
Next week's Australian economic calendar includes the May 3rd release of Q1 house prices expected at 5.4% compared to 5.2% last quarter. On May 4th the RBA will hold a policy meeting and are expected to raise rates 25bps to 4.50%. On May 5th March building approvals will be released expected -1% compared -3.3% last month. On May 6th March retail sales will be released expected at 1.4% compared to -1.4% last month along with March trade balance expected -1.62bln compared to -1.92bln last month.
The technical outlook for the AUD is mixed as the AUD struggles to hold above 9300. Expect AUD support at 9223 the April 29th low with resistance at 9339 the April 21st high.
|
