Archived IMT (2011.04.15)

Fears of further tightening out of China could well impact risk appetite today after both Chinese CPI and GDP came in above expectations this morning. There had been speculation that CPI would come in around 5.4% and this proved well founded as it beat expectations of 5.2%, as prices rose at their fastest rate since 2008. Markets turn to US data (CPI, Empire State Survey & IP), as well as a flurry of US bank earnings, including BoA.

China GDP also beat expectations by rising at 9.7% beating expectations of 9.4% and down only slightly from the previous quarter.Despite efforts by Chinese officials to insist that the recent tightening measures are working the strength of these figure suggest further tightening could well be on the way to cool the economy. With that in mind, beware of RRR hike this morning and a fall back in commodity currencies.

Debt restructuring fears for senior bond holders spooked the bond markets yesterday as Greek and Portuguese bonds hit record post euro highs with Greece 2 year yields near 18%.

Yesterdays jawboning by ECB officials yesterday about rising inflation risks are expected to be borne out by Euro zone CPI figures for March, due to be released this morning confirming the earlier flash CPI reading of 2.6%, and justifying in their eyes the ECB decision to hike rates last week.

Contrasting that with US March CPI out later in the afternoon, which is also expected to come out at 2.6% year on year and the comparisons could not be more different as CPI is not the Feds preferred inflation measure, and is therefore largely meaningless with respect to the Feds inflation fighting credentials, which are slowly becoming discredited.

US damaged by widening yield differentials between, not only the Euro, but also as a safe haven currency with CHF making new all-time highs below 0.8900 and the US dollar index looking set to test its 2009 lows at 74.17.

If euro takes out options barriers at 1.4520/30 the next target is 1.4580 and the 2010 highs.

USDJPY breaks below the 200 day MA at 83.45 looking to retest last month's post intervention highs down towards 82.10, if it is unable to retake 83.80.

By KM - AshrafLaidi.com Staff