Archived IMT (2011.04.14)

Rising US jobless claims and worries about Greece jarred sentiment, but markets gradually shrugged it off as the session wore on. Global market attention turns to China's GDP and CPI data (see detail below), both of which are seen on the strong side. Markets are now pricing in at least 3 more interest rate hikes of 25-bps each by the PBOC, which raises the question about the full impact, considering the rumblings from Greece and Portugal.

U.S. jobless claims shot to 412K compared to the 380K expected and 385K prior. A flight to safety followed with USD/JPY briefly falling below 0.8300 but the early reaction faded on speculation the rise might be a one-week phenomenon or due to a turn of the quarter. Next weeks number now grows in importance.

THE RISK TRADE CONTINUED TO REVERSE and USD/JPY gained after Noda said Japan continues to ask for G7 FX cooperation. A U.S. 30yr auction scored on the strong side at 4.531% compared to the 4.56% WI yield. The strong demand was a slight negative for USD/JPY but the lack of follow through showed a market that isnt committed one way or another.

PLOSSER (voter, hawk) said the Fed may need to act in 2011 and that officials havent decided on an exit plan. Most believed a plan consisting of selling assets followed by raising rates was already decided. Evidently not. Meanwhile Tarullo (voter, moderate) reiterated the core opinion of the Fed that there is no need to terminate or increase QE2 while also quipping that commodity price volatility is legendary.

BUT USD FELL ANEW after Germany hinted the Chinese yuan could be added to the IMFs SDR basket. World leaders are slowly chipping away at the dollars status as the lone reserve currency. The euro gained after Germany took back comments from Wednesday that endorsed a Greek restructuring.

Commodity currencies led the charge higher in late NA trading as the USD slumped. Silver continues to march toward the 1979 all-time high of $48.70 as it hit $42 on Thursday after Bolivia moved to nationalize production. Gold is back to within a shade of the all-time high and stocks were flat.

ASIA PACIFIC PREVIEW

Chinese GDP, CPI, industrial production and retail sales for March will be released at 02:00 GMT but we warn that these figures often trickle out ahead of the scheduled time. Media in Hong Kong said CPI will be between 5.3% and 5.4%, which is above the 5.2% consensus and 4.9% prior. It also suggests CHINA MAY HAVE MORE WORK TO DO THAN the 1-2 rate hikes priced in something that should weigh on CAD, AUD and NZD. Traders have been reluctant to act, until the rest of the figures are released. Retail sales (exp: +16.3%) and IP (exp: +14.0%) are important but will be overshadowed by GDP (exp: 9.3%). Given the strong import and export trade data earlier this week, we strongly suspect the market is pricing a higher figure than the consensus. Dont expect to see a lasting AUD rally even on a figure around 9.5%. Something close to 9.7%, however, would easily spark the 40 pip rally to drive AUD/USD to a fresh all-time high. At 0430 Japan also releases IP (exp: +0.4% m/m) but any misses will be blamed on the earthquake.

By AB - AshrafLaidi.com Staff