Asia's Indices Unable To Take Lead From US Markets
| Apr 30, 2014 06:18AM ET
FX markets were range-bound as Asia’s regional indices were unable to take the lead from US markets. S&P was able to rally for the second consecutive day on the back of strong earnings reports. This renewed risk appetite was in spite of the growing geopolitical tensions and weak US consumer confidence and lower housing prices. In Asian, performances were mixed. Kospi, Hang Sang and Taiwan all fell, while the Nikkei, Shanghai composite and Singapore rose. The lack of cohesiveness in stock took the bullishness out of the recent Asia FX rally. Traders had been focused on JPY before the BoJ decision, pushing USD/JPY lower to 102.30 but reaction was muted after the non-event. AUD/USD was slightly higher to 0.9289 on the back of private sector credit growth, which remained unchanged at a reassuring 0.4% m/m. NZD/USD was also bid, climbing to 0.8572 on stronger domestic data as building permits rebounded sharply and as activity outlook and business confidence remained near decade highs. In addition, despite the higher NZD exports intentions remain raised. In Singapore, unemployment rate 1Q unexpectedly jumped to 2.1%vs. 1.8% exp in from 1.8% prior read. And finally on the data release front UK Gfk consumer confidence increased to the highest level in nearly seven years to -3 in April, from March's reading of -5. Just one more reason to be bullish GBP despite slightly disappointing GDP reads yesterday.
In Japan, BoJ continued its current strategy for asset purchases unchanged. The incoming data has been slightly stronger than many had anticipated, which has lowered expectations for additional easing (we still anticipate July action). Japan’s Industrial production rose 0.3%m/m in March after the sharp deterioration of -2.3%m/m in February.
Traders should anticipate plenty of important data today in European sessions. Markets expect euro area CPI inflation to rise to 0.8% y/y in April, from the year low of 0.5% y/y seen in March. That said, after Germany's weak read, the risks have increased to a lower than expected read. These short term reads should not affect the ECB mid-term read significantly but a lower read will have FX traders anticipating ECB action. From Spain and Belgium Q1 GDP will be released. The Spanish read should continue to support a gradual recovery in domestic demand and minor improvement in labor markets. In Norway, data regarding retail Sales and Unemployment should both show positive trends and support NOK in the short term. Out of EM, Turkey will release their central bank inflation report and trade balance figures. We believe the report will continue the banks line of hawkish rhetoric heard at recent policy meetings, therefore spillover to TRY should be limited. Turkey's trade deficit is estimated to widen marginally, to $5.8bn from $5.1bn in February.
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In the US session, the FOMC policy meeting will take center stage. However, we don’t anticipate any large market reaction. The Fed will probably taper another $10bn and improve forward guidance slightly without having any new projections. Yet without a press conference any statement will be measured. On the data front, Q1 GDP growth is expected to come in at 1% q/q from 2.6% Q4 2013. US ADP employment change is projected to come in at 210k vs. 191k prior read which should have little effect on Friday NFP 215k consensus read. And to the north, Canada GDP 0.2% m/m down from 0.5% in January. With easing, economic data and a central bank firmly on hold, CAD will be effected by USD direction.
Currency Tech
EUR/USD
R 2: 1.3855
R 1: 1.3836
CURRENT: 1.3807
S 1: 1.3797
S 2: 1.3779
GBP/USD
R 2: 1.6858
R 1: 1.6745
CURRENT: 1.6811
S 1: 1.6810
S 2: 1.6792
USD/JPY
R 2: 102.88
R 1: 102.76
CURRENT: 102.45
S 1: 102.32
S 2: 102.08
USD/CHF
R 2: 0.8858
R 1: 0.8844
CURRENT: 0.8838
S 1: 0.8822
S 2: 0.8801
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