Top Stories
- EZ GDP in Q1 better than forecast
- EUR/USD breaks above 1.4300 on strong eco data at core
- Nikkei off -0.70% Europe up 0.50%
- Oil at $100/bll
- Gold at $1513/oz.
Overnight Eco
- CHF PPI 0.3% vs. 0.4%
- EUR French Prelim GDP q/q 1.0% vs. 0.8%
- EUR German Prelim GDP q/q 1.5% vs. 0.9%
- EUR French Prelim Non-Farm Payrolls q/q 0.4% vs. 0.4%
- EUR Italian Prelim GDP q/q 0.1% vs. 0.3%
- EUR Flash GDP q/q 0.8% vs. 0.6%
Event Risk on Tap
- CAD New Motor Vehicle Sales m/m expected at
- USD Core CPI m/m expected at
- USD CPI m/m expected at
- USD Prelim UoM Consumer Sentiment expected at
- USD Prelim UoM Inflation Expectations expected at
Price Action
- USD/JPY drifts to 80.50
- AUD/USD rallies to 1.0700 on firmer PM and growth
- GBP/USD 1.6300 caps in quiet trade
- EUR/USD break above 1.4300 on stronger GBP
The EUR/USD garnered a boost from much better than expected Q1
GDP readings from Germany and France rising above the 1.4300
barrier in early morning European trade. The data from EZ core
economies showed robust growth at the start of year, but questions
persist as to whether economic activity in the region may have
already peaked.
German Q1 GDP data beat estimates printing at 1.5% versus 1.0% eyed
as the country's economy expanded beyond the pre-2008 crash levels.
Earlier French GDP data also surprised to the upside printing at
1.0% versus 0.6% forecast. Overall the strong readings from the
core helped to lift the broader EZ GDP to 0.8% versus 0.6%
forecast, but the results from edge economies were not nearly as
robust with Spain GDP coming in line at 0.3% and Italian GDP
printing softer at 0.1% versus 0.3% projected.
Although the breakdown of the data will not be available until the
release of the final report on May 24th, the German GDP growth
likely benefited from strong growth in exports and capital
investment. The news suggests that German GDP could grow at 3% plus
rate in 2011 which will likely prompt the ECB to continue normalize
rates closer to historical levels. There is a danger however, that
Q1 GDP may have recorded peak growth as the latest business survey
data from the region indicates that soaring energy costs, higher
exchange rate values and deceleration in global growth may all
dampen demand going forward.
Although the economic picture in EZ looks relatively positive,
the political situation is far less certain. The issue of Greek
dent restructuring continues to dog the pair and next week the
focus is likely to turn away from the eco calendar and towards the
Eco Fin meeting scheduled for next Tuesday. Traders are likely to
wait for some sort of a resolution to the conflict before bidding
up the EUR/USD significantly higher as the issue of ECB tightening
remains very much in doubt until the union creates some sort of
workable solution for Greece.
In North America today the docket contains US CPI which may be a
bit hotter than expected given the rise in energy and food costs,
as well as the U of M reading at 13:55 GMT. Consumer sentiment
remains depressed and market consensus is calling for only a small
improvement to 70 form 69.8 the month prior. Should the data miss
to the downside it could put fresh pressure on the risk trade
especially if equities falter into the weekend. With USD/JPY
trading near the 80.50 level a test of the key 80.00 barrier may be
in store if risk aversion flows accelerate into the weekend.
FX Upcoming
| Currency |
GMT |
EST |
Release |
Expected |
Prior |
| CAD |
12:30 |
8:30 |
New Motor Vehicle Sales m/m |
|
-0.6% |
| USD |
12:30 |
8:30 |
Core CPI m/m |
|
0.1% |
| USD |
12:30 |
8:30 |
CPI m/m |
|
0.5% |
| USD |
13:55 |
9:55 |
Prelim UoM Consumer Sentiment |
|
69.8 |
| USD |
13:55 |
9:55 |
Prelim UoM Inflation Expectations |
|
4.6% |