Archived IMT (2011.04.08)

US Roundup & China Saturday Data

USD slumped Friday on lingering govt shutdown fears while EUR surged 200 pips to nearly 1.45. Brent touched $123 and WTI hit $112 as fresh protests erupted in the Middle East, gold hit a record for the fourth consecutive day and silver broke $40/ounce.

Negotiations are continuing to avoid a U.S. government shutdown ahead of Friday's midnight deadline -- a deal is appearing more likely but still uncertain. Dollar weakness on Friday is partially due to shutdown fears but we expect this is overdone and those positions will be covered when markets re-open whether or not there is a shutdown. FEARS THAT US WOULD STOP PAYING INTEREST on its debt in the event of a shutdown, triggering default but this is an absurd notion as the implications for such a move would be catastrophic. The real risk is that a prolonged shutdown stymies economic growth. Dollar selling could get more aggressive later in the coming week if there is no deal.

CANADIAN EMPLOYMENT data was better than it first appeared and CAD rebounded from earlier losses. Although Canada shed 1.5K jobs in March ALL THE LOSSES WERE IN PART-TIME positions, while full-time employment increased a whopping 90.6K. The unemployment rate fell one tick to 7.7%, as expected. The Bank of Canada meets Tuesday and is expected to hold rates at 1.00%.

OIL was boosted by a military deadlock in Libya and protests with at least 19 dead in Syria. In addition, an election in Nigeria on Saturday is a risk. Traders look to be long oil on weekends due to the potential for political instability.

Fridays CFTC COMMITMENT OF TRADERS report showed speculators turning aggressively AGAINST THE YEN. After six weeks in a net long position including +7.0K last week yen positioning fell to a net short 43.2K contracts. AUD continues to be the darling of futures traders, hitting FRESH RECORD +90.9K NET LONGS. The net long euro position expanded to 58.9K from 56.6K and the market remains short of the U.S. dollar but positions were trimmed slightly. The CFTC will be mostly be closed if the U.S. government shuts down, meaning this will be the final Commitment of Traders report until a budget is passed.

CHINA SATURDAY DATA

Chinese trade balance data will be released for March on Saturday. The consensus is for a $3.35B deficit after the first deficit in 7 years (-$7.3B) in February. Ignore the deficit/surplus and focus on imports as they are a leading indicator for worldwide demand. The consensus is for a 19.5% year-over-year increase. Expect to see commodity currencies (especially AUD) climb on a reading above 22% or slide on something below 17%.

By AB - AshrafLaidi.com Staff