Risk Trades Roar Ahead of Chinese GDP

The euro rallied to one month high and the yen fell to a one month low on optimism about a Spanish bailout and better economic data. The Australian dollar was also a top performer ahead of third quarter Chinese GDP. Tuesday nights Premium Insights include 9 new trades and 4 trades in progress, alongside an emphasis on the confluence of support points across 5 segments of the Intermarket space. Cable longs hit all targets. We also have 5 new charts with a special technical focus on EURGBP.

The Spanish bond market surged on Wednesday, sending yields to the lowest since March. Finlands PM said he expects Spain to take a precautionary credit line in a compromise that will allow the ECB to intervene without the onerous ESM obligations.

In the US, housing starts surged to 872K compared to 770K expected. Building permits also improved considerably in a sign that the long-anticipated housing recovery has finally materialized.

EUR/USD marched to 1.3120 and USD/JPY climbed above 79.00. The Canadian and Australian dollars also posted their largest one-day gains in a month.

The Japanese press reported that the BOJ is likely to ease further at the Oct 30 meeting.

The focus of trading is squarely on the 0200 GMT release of third quarter Chinese GDP. The consensus is for a 7.4% rise.

Signs point to a better number. Yesterday, Chinese Premier Wen said he was confident of meeting the full-year growth target and that Q3 GDP was relatively good. The trade data released on the weekend also adds an upward bias.

Other Chinese data to be released alongside GDP include September retail sales, which are expected up 13.2% and industrial production, which is forecast to rise 9.0%.

The risks may be skewed to further AUD gains because a disappointing number may lead to immediate rumors/speculation about Chinese rate cuts or stimulus.

Tuesday night Premium Insights are out. Direct Access can be found here: http://ashraflaidi.com/products/sub01/access/?a=688 NONsubscribers can join here: http://ashraflaidi.com/products/sub01

-AB