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Risk FX Consolidates in Quiet Trade

Boris Schlossberg, Director of Currency Research, GFT

Top Stories

  • Japan GDP beats slightly to upside
  • Ascension Day holiday keeps FX quiet
  • Nikkei up 0.86% Europe -0.73%
  • Oil At $93/bbl
  • Gold at $1547/oz.

Overnight Eco

  • AUD Consumer Inflation Expectation (MAY) 3.1% vs. 3.3%
  • JPY Gross Domestic Product (QoQ) (1Q P) 1.0% vs. 0.9%
  • JPY Industrial Production (MoM) (MAR F) 1.3%
  • NZD Producer Prices- Inputs (QoQ) (1Q) 0.3% vs. 0.0%
  • NZD Producer Prices- Outputs (QoQ) (1Q) -0.1% vs. 0.1%

Event Risk on Tap

  • USD Initial Jobless Claims (MAY 12) expected at 365K
  • USD Continuing Claims (MAY 5) expected at 3250K
  • USD Philadelphia Fed. (MAY) expected at 10
  • USD Leading Indicators (APR) expected at 0.1%
  • CAD Wholesale Sales (MoM) (MAR) expected at 0.3%

Price Action

  • USD/JPY quiet at 80.36
  • AUD/USD drifts back .9920 as risk aversion picks up
  • GBP/USD lower on Cameron comments to break 1.5900
  • EUR/USD marks time at 1.2715

A very quiet night of trade in the currency market due to Ascension day holiday in Continental Europe with EUR/USD consolidating its recent losses while cable saw more selling pressure on some dovish comments by David Cameron. With no economic data in European session currencies marked time after seeing a small rally in risk during Asian trade in the wake better than expected Japanese GDP numbers.

Japan’s GDP increased slightly better than expected at 1.0% versus 0.9% eyed expanding for the third quarter in a row after last year’s contraction in the wake of the Fukushimi nuclear disaster. On an annualized basis, GDP surged 4.1%, accelerating from a revised 0.1% rise (-0.7% in the previous report) for the fourth quarter. Economic and Fiscal Policy Minister Motohisa Furukawa said in a statement that Q1 growth was led by strong domestic demand backed by demand for rebuilding the earthquake-hit northeast and revived subsidies for buying low-emission vehicles. 

The improvement in Japan’s economic activity sparked a small rally in risk FX with EUR/USD rising to 1.2750 while Aussie climbed all the way .9965, but the enthusiasm quickly faded during the lackluster European trade and currencies followed equities into the red. Cable was particularly badly hit dropping through the 1.5900 barrier after David Cameron made comments that the BOE could do more to stimulate the UK economy. Traders took those words to mean that UK monetary officials may be free to entertain the prospect of more QE and sterling tumbled through its 200 day moving average as a result.

Although the pound has been the beneficiary of safe haven flows as the situation in Europe continues to implode, the new rhetoric regarding QE could make sterling much less attractive as a safe haven bid and unwind much of the recent rally in the pair.

In North American today the eco calendar includes the Philly Fed survey and LEI data. The market expects Philly Fed to improve but LEI to print slightly lower at 0.1% versus 0.3% the period prior. Trading however may remain lackluster for rest of the day with European liquidity absent and unless we get fresh headlines regarding Greece risk FX may continue to consolidate as the day proceeds.

I will be in London until after Memorial Day, no reports until then. 

FX Upcoming

Currency GMT EST Release Expected Prior
USD 12:30 8:30 Initial Jobless Claims (MAY 12) 365K 367K
USD 12:30 8:30 Continuing Claims (MAY 5) 3250K 3229K
USD 14:00 10:00 Philadelphia Fed. (MAY) 10 8.5
USD 14:00 10:00 Leading Indicators (APR) 0.1% 0.3%
CAD 12:30 8:30 Wholesale Sales (MoM) (MAR) 0.3% 1.6%