FX Daily Planet: London Open

FX Daily Planet: London Open

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View for the day

A series of Chinese economic figures released today did not surprise the market much. Although 1Q GDP was stronger than consensus at +11.9% (cons. +11.7%), it was exactly similar to the figure leaked through the overnight session. March industrial production, retail sales and fixed investments were broadly in line with consensus while growth rates of PPI and CPI were slightly lower than consensus (CPI was also similar to the figure leaked yesterday). USD/CNY NDFs did not move much on these releases and is trading at flat to yesterday’s close. G-10 currencies stayed in narrow ranges as well. Meanwhile, USD/Asia traded lower with the firmness in the regional stocks.

In the London session, as the event calendar is very light, relevant headlines on Greek issue should remain the main market driver. On the other hand, today’s event calendar in the New York session continues to be quite heavy. On the economic data front, weekly initial jobless claims, April NY/Philly Fed index and March industrial production are due for release. Our forecasts for these releases are mixed; we are more bearish on the manufacturer’s surveys while more bullish on the IP compared to the market consensus. Although some Fed’s soundbites are expected today, we do not expect any significant market impact as the Chairman Bernanke reaffirmed its “low for long” stance yesterday. Finally, Google will release its 1Q earning after market.

Overnight news

CNY: 1Q GDP 11.9% vs 11.7% cons; Mar CPI 2.4% vs 2.6% cons; Mar PPI 5.9% vs 6.4% cons; Mar retail sales 18.0% as expected; Mar IP 18.1% vs 18.2% (all in %oya); Mar fixed investment 26.4%oya, ytd vs 26.0%

CNY: The PBoC sold 3-month bills at a yield of 1.4088%, unchanged for the 11th sale in a row

JPY: Overseas investors continued to buy Japanese stock for the second consecutive week, net buying JPY572.2bn; total portfolio flow recorded net inflow of JPY1.1trn, increased from previous week's inflow of JPY670.4bn.

JPY: Feb IP final at -0.6% vs prev -0.9%.

GBP: Mar nationwide consumer confidence disappointing at 72 vs 81 consensus.

GBP: Three new polls last night showing a mixed picture. ComRes’s rolling poll shows the Conservatives continuing downwards. YouGov’s poll, completed a day later, has the Tories up at 41% and a lead of 9 points.

US earnings: Yum earnings for 1Q10 came in at $0.59 vs $0.53 estimate.

Today’s watchlist (all times BST; +9hrs for Sydney, +8hrs for Tokyo, -5hrs for New York)

EUR: ECB publishes April Monthly Report @9:00

NOK : Feb trade balance (NOK bn, nsa) @9 :00 (Prev : 32.4)

USD: Apr 10th initial jobless claims (000s, sa) @13:30 (JPM: 440, Cons: 460); Apr Empire state mfg survey (DI, sa) @12:30 (JPM: 20.0, Cons: 24.0); Feb TIC long-term net flows ($bn) @13:00 (Prev: 19.1); Mar IP (%m/m, sa) @14:15 (JPM: 1.2, Cons: 0.6); Mar capacity utilization (%bal, sa) @14:15 (JPM: 73.6, Cons: 73.3); Apr Philadelphia Fed index (DI, sa) @15:00 (JPM: 17.0, Cons: 20.0); Fed’s Lacker speaks at Charlotte Credit Markets Conference @15:30; Fed’s Bullard speaks on Financial Risks @17:15; Apr NAHB housing market index (index, sa) @18:00 (JPM: 16.0, Cons: 17.0); Fed’s Lockhart to hold press briefing at Charlotte Conference @18:40; Volcker speaks on Financial Risks @20:00; Fed’s Lacker to hold press briefing at Charlotte Conference @20:15; Google earnings for 1Q @Aft-mkt (JPM : 6.910, Cons : 6.555) ; Fed’s Yellen speaks on U.S. economic outlook @01 :30

Overnight price action

FX: G-10 currencies range-traded. GBP outperformed the most, rising 03% while SEK and JPY underperformed the most, falling 0.2% all against USD

FX vol: front end vols in AUD, NZD pairs remain heavy falling 0.3-0.4vols

Commodities: gold down 0.1%; oil up 0.2%

Bonds: JGB yields mostly unchanged; 5yr to 10yr yields down 1bp

Equities: mixed performances in Asian equities; the Nikkei up 0.5% while Shanghai is trading flat

Technical View for the day

The big question across asset classes currently is whether the incredible risk rally enjoyed since March last year can be prolonged even further on the back of continuously positive news that the market is currently fed with? Probably yes, provided that interest rates remain low, that the good news has not fully been discounted yet and stays positive, that the ongoing and completing 5th wave advance is going to be an extended one (indicated on a break above 1215/29 in the S&P500), that investors are still underinvested and last but not least, that Greece or any other European country is steadily reducing their budget problems without causing further turmoil. The number of if’s and the decreasing volume in the last rally is definitely a matter of concern but who knows….Back in reality, EUR/USD is still trading below key-resistance between 1.3769 and 1.3840 while German-Greek yield spreads have started to widen again. It however takes a break below 1.3545 to receive a fresh sell-signal and a break below Fib.-support at 1.3379 to confirm the resumption of the bear-trend towards the next projected target at 1.3093/81. The JPY on the other hand remains at the brink of a deeper setback as resilient stock markets refuse their support. It however takes a break above 127.94/129.21 in EUR/JPY, above 94.27 in USD/JPY or above 147.53/148.55 in GBP/JPY to receive strong evidence that JPY is due for a much deeper setback.

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