Intraday Market Thoughts

Euro Shrugs off ZEW, US Retail Sales next

by Ashraf Laidi
Mar 13, 2012 12:12

BOJ does not expand QE; Swiss PPI rose; UK trade balance widened; German and Eurozone ZEW economic sentiment improved. Focus turns to retail sales. Key event is FOMC.

The USD is mixed in the ongoing session. It is stronger against EUR, CHF and JPY and unchanged against the rest of the majors. European equities are gaining nearly 1%. Relative strength winner is CAD and JPY is the weakest.

BOJ concluded its two day meeting with a decision to leave rates unchanged at 0 to 0.1% and not to expand the asset buying program that currently stands at JPY 65 trillion. JPY initially strengthened after the widely expected decision but lost all of its gains and printed a new 11 months low against the dollar at 82.78.

On the data front, Swiss PPI rose in February 0.8% from January's unchanged result; UK trade balance widened to GBP 7.5 bln from previous 7.2 bln and Eurozone ZEW economic sentiment index improved to 11 from -8.1.

German ZEW economic sentiment soared in March to 22.3 from 5.4 reaching the highest print since June 2010 and improving chances that Germany will avoid recession. However, the current conditions component slipped to 37.6 from 40.3. EURUSD continues to be under pressure and trades right above the 1.31 level.

Market volatility could increase at 7:30 ET when ECB president Draghi speaks in Paris.

The US session starts at 8:30 am ET with retail sales that are seen higher in February at 1.1% from 0.4% (core sales exp. 0.8% from 0.7%).

The key event today is the FOMC statement that is due at 2:15 pm. The FED will acknowledge improving fundamentals, especially with respect to the labor market and is likely choose the "wait and see" approach instead of dismissing QE3 altogether. The FOMC is also expected to shed light on talk of a new program based on sterilized QE. According to the January statement, the FED is not expected to raise the rate until late 2014.

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