Trichet boosts USD, Earnings & Consumer Confidence Dominate

Trichet's comments that a stronger US dollar is in the interest of the US saw the single currency slip a little overnight, but this is no surprise given that it is probably driven more by concern about the strength of the euro, and its effect on peripheral economies growth potential. Todays short term T-bill auction by Spain of 3 and 6 month bills is not expected to cause any problems, but the yields will probably continue to be on the high side.

USD/CHF at record lows on rising UBS inflows; UK industrial orders disappoint; Case-Shiller, Conference Board Leading Index data due

Swiss economy has long stood out as the model of fiscal responsibility in an era of profligate spending on both sides of the Atlantic. With the advent of higher scrutiny on US debt by S&P, the franc has become the ultimate safe-haven destination. The swissy hit a new record high against the dollar below CHF0.8750, also outperforming EUR and GBP, helped in part by a much better than expected Q1 result from UBS. Having weathered the storm of the oversight by US and European tax authorities, the Swiss financial stalwart beat on the top and bottom lines with CHF8.3B in revenue. More importantly, UBS attracted CHF11B over the past quarter - its highest inflows since before the financial crisis - helping shares to a 6% rise in early Zurich trade.

EUR REVERSED COURSE from the Asia session damage that followed a mixed set of comments from Trichet. The ECB President said he saw no specific evidence of significant 2nd round inflation and also reiterated his shared support with the US authorities for a stronger dollar. Lip service to dollar weakness was but a blip in currency market impact, as USD bounced off the $1.45 post-Trichet low to test $1.4650 - its highest print since late 2009.

GBP A NOTABLE UNDEPERFORMER of the session, mainly treading water against the greenback and losing ground to EUR and CHF. Uncertainty is high ahead of tomorrow's GDP report and its impact on expectations for an eventual BOE stimulus exit that are already being pushed back to late 2011 in the analyst community. Disappointing industrial CBI order expectations have done little to brighten sentiment, retuning into the red after last month's lone positive number since 2008. A 3-month low, -11 print was below expected +4 and the prior +5, with manufacturing outlook remaining soured by the stiff austerity imposed by UK's Conservative government. Former resistance turned support in GBP/USD at $1.6430 is key in keeping the bears at bay, though event risk is high ahead of the GDP report and the FOMC decision on Wednesday.

US markets awaits the release of the Case-Shiller report on home prices (13:00GMT) as well as the Conference Board leading index (14:00GMT) data. The former assesses the month of February with risk balanced toward a disappointment. Given the modest improvement in existing and new home sales data in March, the lagging CS index should have limited impact the assessment of the (non) recovery in US housing. The April Conference Board consumer confidence index is expected to bounce back to 64.6 from 63.4 which was the first decline in 3 months from February's 3-year high.

In US pre-market earnings, Delta Airlines and 3M both beat consensus on earnings and revenue, while defense giant Lockheed Martin raised its FY EPS outlook by $0.25 to $6.95-7.00. Steelmakers AKS and X will post results shortly, updating investors on the rising costs of iron ore. Consumer discretionary's Hershey and Coca Cola are also on tap - both are likewise expected to be affected by higher costs of cocoa and sugar.

By GG - AshrafLaidi.com Staff