DAILY MARKET COMMENTARY
2 May 2011 – 8:00 GMT
Monday
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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT
USD
US President Obama announced that Osama Bin Laden has been killed by US forces in Pakistan. The dollar strengthened across the board shortly after the news broke. In fact, a nervous open by precious metals had already set the dollar on a strengthening trajectory. EURUSD traded 1.4763-1.4864, and USDJPY 81.00-81.69. Earlier, AUDUSD finally took out the 1.10 level, but could not hold it.
Although the S&P500 only rose +0.23% on Friday, the index's sharp rebound since mid-April has helped keep FX risk appetite supported over the past fortnight. S&P Futures are already trading 7.1 points higher. The University of Michigan confidence index reached 69.8, narrowly missing consensus expectations. The Chicago PMI slipped to 67.6, again failing to meet consensus forecasts. The key ISM manufacturing survey for April is due. Our US economics team are in line with consensus opinion and expect some slippage to 59.5, from 61.2 in March. Both the UK and Singapore are on holiday today.
EUR
Greek Finance Minister Papaconstantinou repeated that Greece does not need to restructure its debt, but that an extension to the repayment schedule on the EU/IMF loans could be beneficial.
Eurozone CPI inflation accelerated in April, exceeding consensus expectations for a second consecutive month. The flash estimate rose to +2.8% y/y (cons. +2.7%), well above the ECB's policy target of "below, but close to, 2%". Germany's seasonally adjusted jobless rate for April was unchanged at 7.1% (cons. 7.0%). The number of unemployed dropped by 37k.
CHF
The CHF advanced strongly on Friday after SNB Chairman Hildebrand made some surprisingly hawkish remarks. On inflation, he said that "certain upside risks are visible", but that these are still moderate. He acknowledged though that the unexpectedly high March CPI exaggerated these effects due to methodological changes. Hildebrand also said that keeping rates at current levels for too long would entail long term risks to price stability. One could certainly argue that he is preparing the ground for a June hike, though he included enough disclaimers to leave the policy board's options open if, for example, more weakness were to appear on the export side, or if the franc were to strengthen further.
The Swiss KOF leading indicator for April printed well above expectations at +2.29 (cons +2.20). Our Swiss economist notes that the report hints at accelerating growth and increasing momentum. Also, a strong positive signal came from construction.
NZD
Moody's announced that the content of New Zealand's May 19 budget will be critical to whether the outlook on the Aaa rating is kept at stable.
New Zealand's commodity prices set another new record high in April rising +1.6% m/m.
AUD
Australian house prices fell -1.7% q/q in Q1, their sharpest pace of decline since Sept. 2008. Our Australian economists stick to their view that the next RBA hike will likely come in August. We remain long AUDNZD from 1.3545, targeting a move up to 1.42.
CAD
A surprise contraction in February's GDP caught the wider market off-guard, leading to some CAD selling on the numbers. GDP fell -0.2% m/m (cons. 0.0%). The annualised figure also disappointed but still grew at a healthy clip, coming in at +2.9% y/y (cons. 3.1%).
Our Canadian economists are not especially concerned about the negative monthly print, and observe that this is only the third monthly decline in the past 21 months. FX markets eventually reached the same conclusion and USDCAD closed lower at levels unseen since Nov. 2007.
A. White
Analyst at Fibosignals.com
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