Intraday Market Thoughts

SPN Auction Adds to EUR Selling, USD Extends Rally Ahead of ADP, ISM

by Patrik Urban
Apr 4, 2012 12:25

UK services PMI solid; Eurozone retail sales declined; German factory orders rose less than expected; poor Spanish bond auction. Focus turns to ECB and its press conference; ADP and ISM non manufacturing. Both of EURUSD longs stopped out, while USDCAD short , silver shorts and oil longs remain in progress. See below for detail.

The greenback continues to add gains to the rally that started yesterday after the FOMC minutes revealed no hints of further QE. European equity indices are lower by about 1% and the relative strength winner is JPY.

UK services PMI printed strong 55.3 in March, up from February's 53.8. The growth in Q1 was the strongest since Q2 2010 and the employment level increased modestly for a fourth month in a row. Considering the solid PMIs results from this week and the CPI that declined slightly less than expected the BOE may put further QE on hold for now.

Eurozone retail sales declined 0.1% in February after growing 1.1% in January which brought the annual figure to -2.1% from previous -1.1%. Continued high unemployment rate, lagging wage growth and rising price of energy contributed to the decline.

German factory orders rose 0.3% in February, higher from previous -1.8% but considerably below expectations of 1.2%. The annual print worsened to -6.1% from -6.0%. The only positive reports from today were final French, German and Eurozone PMIs for March that were revised slightly higher from their initial estimates.

Spain had a poor bond auction today as it sold only EUR 2.59 bln worth of various bonds (2.5 to 3.5 bln target). All average yields rose and bid to cover fell.

The ECB will announce their rate decision today at 7:45 am ET and not on Thursday as usual. The bid rate is broadly expected to remain at 1%.

The US session starts at 8:15 am ET with ADP report that is seen lower in March at 205K from previous 216K.

The highly anticipated ECB press conference starts at 8:30 am. Given the continued worries about the growth outlook and the recent concerns about Spain, it seem unlikely that the ECB president Draghi would hint an exit from existing accommodative policies.

ISM non-manufacturing is due at 10:00 am and it is expected to decline in March to 56.9 from 57.3.

WTI continues to trade under pressure around 103.30. Gold dropped to 1630 and trades near session lows while silver hovers around the 32 mark.

Both of Mondays EURUSD Premium longs were stopped out, while USDCAD short missed he 0.9880 target by 8 pips, now remaining in progress. EURGBP longs in progress and so are silver shorts and oil longs remain in progress. Click here for direct access to Mondays edition Non subscribers can click here to join:


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