Archived IMT (2011.04.19)

Monday's dramatic moves faded and CAD and EUR were the best Tuesday performers as risk appetite rebounded on decent corporate earnings. The low-yielding USD, CHF and JPY were the underperformers. The Asia-Pacific session features Japanese trade data and key Australian import/export prices seen as a hint to external inflation.

Tuesdays fx trade was primarily consolidation from Monday's larger moves. U.S. stocks recovered about half of Mondays losses while commodities inched higher with gold falling just short of $1500.

It was, by and large, a relatively rosy news day (when comparing sentiment ot Mondays S&P US downgrade) with U.S. housing starts rising to 549K compared to the 520K consensus. Corporate earnings supported sentiment with J&J and Goldman Sachs beating before the bell. After the NA close, IBM announced earnings $2.41 compared to the $2.30 expected and raised guidance (new business signings were weak, however). Intel also beat handily with earnings of 56 cents and revenue of $12.85 billion compared to the consensus of 46-cents at $11.6 billion.

The euro closed at 1.4334; narrowly above support in the 1.4320-1.4330 range. The bounce is just above the 50% retracement of the two-day fall from 1.4502 to 1.4157. Such a close warrants the road towards $1.49 as long as a weekly close below $1.43 is avoided.

The only POTENTIALLY GAME-CHANGING NEWS news on the day came from Canada where March CPI jumped to 3.3% y/y from 2.2% (exp: 2.8%). The rise was not only from energy but also food, transportation and health. USD/CAD quickly dropped to 100 pips to 0.9550 then consolidated in a 30 pip range from 0.9550-0.9580. The April 7 low of 0.9526 (a three year low) remains key support. The inflation figures renewed speculation of a rate hike but remember that the BOC warned earlier this month that a number of temporary factors will boost total CPI inflation to around 3 per cent in the second quarter of 2011. Also note that core inflation is rebounding from a 26-year low of +0.9% y/y in February. There is also talk that the Winter Olympics last February could have skewed the data.

ASIA PACIFIC PREVIEW

At 2350 GMT, Japans trade surplus is expected at 645.4B for March, slightly lower than the 654.1B in February. Remember that in January Japan reported a 471 billion deficit -- the first in nearly two years. Given the impact of the disaster, we expect to see many months of distortions in this data point and expect that to take away straightforward trading opportunities. At the same time, Japans tertiary industry index is expected to rise 0.2% in Feb after a 2.1% rise in Jan.

At 0130 GMT Q1 Australian import/export figures are expected to rebound from large FX driven declines in Q4 2010. The consensus is for a 4.5% quarterly rise in export prices and a 0.6% rise in import prices. Given the wait and see rhetoric from the RBA evident in Tuesdays minutes, this report is likely to have only a minimal impact. The import figures will typically have the strongest impact and would need to exceed 1.5% to alert policymakers while a flat reading will emphasize that the RBA is on the sidelines for several months. There is still talk that the RBA could hike to 5.50% in Q4 from the 4.75% current rate but this talk appears overdone and there is an equal chance we get no hikes at all.

By AB - AshrafLaidi.com Staff