Intraday Market Thoughts

USD up on Lacker's Comments, Ahead of CPI

by Patrik Urban
Mar 16, 2012 11:33

European trade deficit widens nsa; hawkish comments from Jeffrey Lacker; Eurozone issuance. Market awaits CPI, industrial production, capacity utilization; UOM consumer confidence and Canadian international securities purchases. The latest on Wednesday's Premium trades is below.

USD marginally stronger in the ongoing session. Major European equities are gaining about 0.4% and the relative strength winner is GBP.

The only report published during European trading was Eurozone trade balance that declined in January to EUR 5.9 bln from previous EUR 7.4 bln. Non seasonally adjusted figures showed a larger than expected deficit of EUR 7.6 from previous deficit of EUR 16.1 bln. Deficits during the winter are common as the Eurozone imports more fuel and energy which was especially the case this year as January and February were unusually cold.

Hawkish comments were published on Richmond FED website yesterday. where its president and FOMC member Jeffrey Lacker said that he dissented on FOMC decision as he thinks that increasing rates is likely to be necessary some time in 2013.

Eurozone issuance for this week has been completed totaling nearly EUR 26 bln which is significantly higher compared to last week's EUR 9.26 bln. Next week, total issuance should ease to EUR 5.25 bln. EFSF plans to sell 5 year benchmark and 20-30 year bond next week with a combined value of EUR 4-4.5 bln.

The New York session kicks off at 8:30 am ET with CPI that is expected to remain steady in February at 2.9% on annual basis while the core CPI is anticipated lower at 2.2% from previous 2.3%. A y/y reading of 3% in headline CPI will provoke more talk of inflation, and potentially trigger further USD upside on the argument of additional gains in bond yields.

Industrial production and capacity utilization are due at 9:15 am ET and are seen higher at 0.4% from 0% and 78.9% from 78.5% respectively.

The last report of the week is UoM consumer confidence at 9:55 am that is expected to rise to 75.6 in March from 75.3. Today's data is likely to be highly scrutinized, given the recent increase in bond yields and could boost them further.

Canadian international securities purchases are due at 8:30 am are anticipated lower in January at CAD 6.27 bln from December's CAD 7.38 bln.

One EURUSD short is stopped out, one is in progress and so is cable shorts. Aussie shorts & gold longs remain unfilled. For details see here:


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