Intraday Market Thoughts Archives

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: http://ashraflaidi.com/products/sub01/access/?a=616

Ashraf discusses the possible challenges facing the Fed as higher bond yields may complicate the objectives of Operation Twist. Will the dollar continue to rise alongside equities? And which currencies are positioned to benefit from any shift in trend? watch here: http://www.youtube.com/watch?v=hKd48CC6RIA&feature=youtu.be

Traders who rushed to buy US dollar a day were having second thoughts on Thursday as the buck tumbled. NZD, CHF and AUD led the broad rebound versus the USD. The Asia-Pacific calendar is quiet as traders there wind down the week. More on rising bond yields and the technical relationship with stocks and USD is found in last nights Premium Intermarket Insights below.

Bonds remain in charge as Treasury yields recouped some lost ground even as US stocks hit fresh highs. A round of the Feds operation twist kickstarted a bond rally that weighed on USD. The euro moved sideways for most of the European session before popping above 1.3090 to 1.3120 in a swift move that was later unwound.

Economic data continues to paint a picture of stable growth in the US. The Philly Fed improved to 12.5 compared to 12.0 expected, the Empire Fed to 20.2 vs 17.5 expected and initial jobless claims were at 351K compared to the 357K consensus.

The oil market was sent into turmoil after a Reuters report saying the UK and US were working on a joint plan to release strategic oil reserves simultaneously. The White House quickly denied the report and it appears as though some confusion about whether they are planning to actually release the reserves, or whether theyre planning to co-ordinate if/when they release the reserves.

In any case, oil tumbled $3 before recovering half the losses and the Canadian dollar was dragged down by the news.

The lone event of interest in Asian trading will be comments from US Treasury Sec Geithner scheduled for 2300 GMT. Final revisions to Japans January leading index at 0500 GMT are unlike to garner a passing interest.

For intermarket charts yields, gold, S&P500 and the USD as well as the latest trades on euro, cable, gold and silver, find direct Access here: http://ashraflaidi.com/products/sub01/access/?a=616 Nonsubscribers can go here: http://ashraflaidi.com/products/sub01/

SNB left rates unchanged and revised outlook; Eurozone employment declined and labor cost rose; Spanish and French bond auctions. Market focuses on PPI, empire state manufacturing, jobless claims, TIC data and Philly FED index. More on rising bond yields and the technical relationship with stocks and USD is found in last nights Premium Intermarket Insights below.

The USD trades little changed since the beginning of the London session. Larger move lower is only seen against JPY. European equities are mixed in -0.2% to 0.2% range and the relative strength winners are NZD and JPY.

The SNB left the 3 month libor rate between 0 and 0.25% in line with expectations and reiterated EURCHF floor at 1.20. The SNB added it is ready to take further measures if the economy or deflation requires it to do so. 2012 GDP outlook was revised to 1% from 0.5% but the inflation is anticipated to decline to -0.6% from -0.3%. In 2014, inflation should reach 0.6%. EURCHF initially fell to 2084 but was able to recover a bit and trades around 2110.

Eurozone employment declined in Q4 0.2% from previous -0.2% q/q (-0.2% from 0.3% y/y) and the labor cost rose 2.8% from 2.6%.

Spain sold EUR 3.01 bln worth of bonds today (EUR 2.5 3.5 bln target). According to MNI, Spain already completed 43.7% of its 2012 funding needs and it is well ahead of other Eurozone countries in that respect. France also had an auction today and it reached a full take up by selling EUR 8.52 bln worth of bonds with various maturities.

In other news, the IMF is expected to approve the 2nd Greek bailout today. Meanwhile, Greek unemployment rate rose sharply to 20.7% in Q4 from 17.7% in Q3. USDJPY along with other JPY crosses fell rather sharply at the end of the Asian trading after reaching new recent highs earlier during the session and ECB deposits fell significantly on Wednesday to EUR 686.42 bln from Tuesday's EUR 815.98 bln.

Gold is trying to stabilize after yesterday's nearly 50 USD decline as investors have been moving out of gold positions into equities over the past few sessions. Key support is seen around the 1550 level.

A busy US session starts today at 8:30 am ET with February PPI that is seen higher at 0.5% from 0.1% as food and energy are expected to rebound (core PPI exp. 0.2% from 0.4%). Empire manufacturing is expected to decline in March to 17.6 from 19.5 and jobless claims should come back down a bit to 357K from last week's 362K.

Net TIC flows from January are due at 9:00 am and are anticipated higher at USD 38.9 bln from previous USD 17.9 bln. Market players will be watching the the details on Chinese holdings of US treasuries. Another pullback in those figures may further boost yields. Philadelphia FED manufacturing index that is due at 10:00 am and is expected to improve in March to 11.9 from 10.2.

For intermarket charts yields, gold, S&P500 and the USD as well as the latest trades on euro, cable, gold and silver, find direct Access here: http://ashraflaidi.com/products/sub01/access/?a=616 Nonsubscribers can go here: http://ashraflaidi.com/products/sub01/

The US dollar rallied on Wednesday as QE3 expectations were scaled back and Treasuries tumbled. The Australian and New Zealand dollars sold off as dollar-based carry trades were unwound. Australian inflation expectations are the highlight of Asia-Pacific trading. More on rising bond yields and the technical relationship with stocks and USD is found in todays Premium Intermarket Insights below.

US yields rose to 3-5 month highs across the curve as bonds slumped. The weight of better US data and the lack of dovish hints from the Fed have

prompted bond bulls to throw in the towel.

Technically, the damage is likely in the early stages as yields closed above their respective 200-day moving averages for the first time in months. Rising yields due to better growth prospects correlate well with higher USD/JPY. The pair climbed to 83.84 the highest since April. More on rising bond yields and the relationship with stocks and USD is found in todays Premium Intermarket Insights.

Economic data was light but a higher US Q4 current account deficit is likely to drag on GDP and lower-than-expected import prices point to continued benign inflation. A new report from the OECD said G20 Q4 growth was 0.7% compared to 0.9% in Q3. The numbers highlight the divergence in the US economy compared to the Europe and emerging markets.

Asia-Pacific Preview

The calendar is busy but there is probably nothing that will impact the market. Australia releases March consumer inflation expectations at midnight GMT after a 2.5% reading in February. At the same time, New Zealand consumer confidence will be released.

Early in European trading, the SNB will release its Libor target and offer an update on the EUR/CHF peg. Market participants bid up the pair to 1.2140 on Wednesday in anticipation of activist musings or an outright hike in the peg.

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Bond yields at 5-month highs, stocks at 4-year highs and the US dollar index at 2-month highs; a positive trifecta whose message signals the US is at the forefront of global economic growth alongside the BRICs at a time when the Eurozone remains shut off by economic deleveraging (austerity) and banking deleveraging (reduced balance sheets). When was he last time tis had happened & what does it mean for the future? Find tis in the Iatest Premium Intermarket rades, with latest trades in silver and gold. Direct Access: http://ashraflaidi.com/products/sub01/access/?a=616 Nonsubscribers can go here: http://ashraflaidi.com/products/sub01/

Watch Bank of England's Monetary Policy Committee member (voter) Ben Broadbent speak in London tomorrow on Thursday - -

WHEN: 11:30 am Thursday, Mar 15 2012

WHERE: Painters Hall. 9 Trinity Lane, London EC4V 2AD

HOW: Contact Min Trehan at mtrehan@marketnews.com and include your full name, phone number and company or whether youre a private trader.

* * * Attendees showing up at the venue WITHOUT sending their details to the aforementioned contact will NOT be admitted * * *

UK claimant count rose but unemployment rate steady; Swiss ZEW improved; Eurozone CPI steady y/y but rose m/m; Italian auction sees full take up. Market turns to current account balance, Canadian capacity utilization and chairman Bernanke's speech. AUDUSD. GBPUSD, EURUSD, CADJPY and oil are among the latest ideas in our Intermarket Insights . See below for more.

The USD is stronger in the ongoing session against AUD, NZD and JPY, unchanged against CAD and CHF and slightly weaker against EUR and GBP. European equities are higher by about 1% and the relative strength losers are JPY and NZD.

Strong retail sales combined with cautiously optimistic FOMC statement and later with positive stress test results have boosted the greenback. Gold and other precious metals continue to be under pressure as the FED gave no hints of QE and instead acknowledged inflationary pressures.

In the UK, the claimant count rose to 7.2K in February from previous 6.9K but the claimant count rate remained steady at 5% of workforce. The ILO unemployment rate stayed at 8.4%. GBP has been supported by buying on the crosses lately but rising jobless claims that reached the highest level since 11/2009 could send it lower, especially against the buck. GBPUSD fell on the news from 5742 towards 5700.

On the data front, Swiss ZEW economic expectations for March improved to 0 from -21.2; the annual Eurozone CPI in February was confirmed at 2.7% (core CPI stayed at 1.5%) but prices rose 0.5% on the month. Eurozone industrial production rose in January 0.2% after a sharp 1.1% fall seen in December.

Italy reached a full take up as it sold EUR 6 bln worth of 2015 and 2019 bonds today. The 3 year yield was the lowest since 10/2010.

The NY session starts at 8:30 am ET with current account deficit that is expected to widen in Q4 to USD 114 bln from 110 bln and Canadian Q4 capacity utilization rate that is seen higher at 81.6% from 81.3%.

Fed chairman Bernanke speaks at 10:00 am in a video conference in Nashville so volatility could increase.

Crude oil inventories due at 10:30 are anticipated to rise to 2.2M barrels from 0.8M barrels last week.

AUDUSD, GBPUSD, EURUSD, CADJPY and oil as well as key charts on Germany's PMI/IFO/ZEW and on GBPUSD are included in our latest Premium Intermarket Insights. Direct Access here: http://ashraflaidi.com/products/sub01/access/?a=615 NONsubscribers can click here: http://ashraflaidi.com/products/sub01/access/

The Federal Reserve acknowledged recent improvements in economic data without hinting at any changes in monetary policy. Risk appetite soared after 15 of 19 banks passed stress tests and several announced share buybacks. NZD and GBP were the best performers while JPY lagged. The Asia-Pacific session will be generally quiet. Todays Premium trades include GBPUSD, EURUSD, CADJPY and oil . See below.

The Fed decision was generally as expected but some money that was in USD short on the chance of a dovish hint at QE3 quickly scrambled to the exits, leading to a short-term dollar rally. The Fed said unemployment had declined notably and that strains in financial markets have increased. Policymakers also acknowledged inflationary pressures due to oil prices but said the effects would be temporary.

The stress test results stole the show from the Fed. The study, which forecasts how banks would perform if unemployment hit 13% and other adverse events, gave a passing rating to all but four banks with Citigroup as the only notable failure. The results were supposed to be published Thursday but the Fed gave them to the banks Tuesday at noon. JPMorgan quickly announced plans to buy back shares and hike its dividend with others doing the same. The Fed claimed it was a mix up and decided to push ahead the reports publication.

Stocks jumped to a 3.5 year high after the report, with the S&P 500 gaining 1.8%. USD/JPY touched 83 for the first time since April 2011.

Asia-Pacific Preview

The calendar is somewhat busy but releases are lower tier and are unlikely to move the market. Westpac consumer confidence at 23:30 GMT, then Australia dwelling starts at 0030 and Japanese industrial production final revisions for January at 0430 GMT. At 0300 Chinese Premier Wen Jiabao gives his final press conference of the NPC.

Todays Premium trades are on GBPUSD, EURUSD, CADJPY and oil as well as key charts on Germany's PMI/IFO/ZEW as well as GBPUSD. Direct Access here: http://ashraflaidi.com/products/sub01/access/?a=615 NONsubscribers can click here: http://ashraflaidi.com/products/sub01/access/

The Fed made some minor edits to its FOMC statement to acknowledge the improvement in labor markets and the rise in energy prices. We expect the central bank to signal more meaningful changes at its April FOMC meeting, most likely opening the door for sterilized asset purchases. Euro shrugs off this morning's jump in the ZEW Expectations index as the Current Conditions index fell to 37.6. When economists and analysts see the positive impact of the LTRO on market liquidity rather than on the economy, they have no choice but to give positive responses regarding the future, thereby, impacting the EXPECTATIONS component but NOT the Current Conditions index. See our latest Premium trades on GBPUSD, EURUSD, CADJPY and oil as well as key charts on Germany's PMI/IFO/ZEW as well as GBPUSD. Direct Access here: http://ashraflaidi.com/products/sub01/access/?a=615 NONsubscribers can click here: http://ashraflaidi.com/products/sub01/access/

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.

Partik Urban

GBP and AUD fell to six-week lows on Monday as mild risk aversion continued to drag ahead of Tuesdays FOMC decision. The euro was the best performer while the Australian dollar lagged. Japans tertiary industry index and Australian home loans are the highlight in Asia. Fridays Premium trades include 2 new trades on EURUSD and 2 new on GBPUSD. See below for details. 2 new on AUDUSD, 2 existing trades on EURGBP 2 new on US crude oil

Disappointing Chinese trade data continued to percolate into the US session. EUR/USD twice attempted to fall below 1.31 but the pair rebounded to 1.3150 as shorts were covered on the inability to break through ahead of the European close.

Later North American and early Asia trading has been whisper quiet. US stock trading volumes were the lowest of the year and the S&P 00 was unchanged at 1371.

Greece officially completed its bond swap and EU officials said they will formally approve the bailout on Wednesday. EU leaders pushed Spain to do more on deficits but the market hardly took note.

Cable fell to the lowest since late January, falling below the 55-day moving average to as low as 1.5603.

The calendar remains quiet in Asia. At 2350 GMT, Japan releases the January tertiary industry index with economists expecting a 0.2% rise. Shortly afterwards, at 0030 GMT, Australia reveals data on home loans for January, with a 0.6% decline expected.

Fridays Premium trades include 2 new trades on EURUSD and 2 new on GBPUSD, 2 new on AUDUSD, 2 existing on EURGBP 2 new on US crude oil. For direct access to those trades and USDJPY warnings/ Jobless Techs, please click here: http://www.ashraflaidi.com/products/sub01/access/?a=614 Non subscribers click here: http://www.ashraflaidi.com/products/sub01/

Markets consolidate; Chinese trade deficit expandst; German WPI declined; Italian GDP revised higher; Eurozone finance ministers meeting. Budget deficit is the only report due today. Fridays Premium trades include 2 new trades on EURUSD and 2 new on GBPUSD. See below for details. 2 new on AUDUSD, 2 existing trades on EURGBP 2 new on US crude oil

The markets are trading within a narrow range in the ongoing session, digesting the PSI deal, triggering of Greek CDS and positive US labor data. European equities are higher by about 0.25% and the relative strength winner is CAD.

Last week, AUD and NZD were under pressure on the back of Chinese growth concerns. This week, China once again impacted sentiment as it reported a trade deficit in February of USD 31.5 bln from previous trade surplus of USD 27.3 bln. New Year largest trade deficit in 22 years is partially blamed on distortion due to lunar new year so it will be interesting to see next month's data.

On the European data front, German WPI rose 1% in February from previous 1.2% which is 2.6% from 3% y/y. Italian final Q4 GDP was confirmed at -0.7% q/q but improved to -0.4% from -0.5% y/y.

Eurozone finance ministers are meeting today to sign the release of the second Greek bailout. No obstacles are expected but risk appetite is not likely to improve on the signing as there is already a talk of a need for a third bailout.

USD could be underpinned this week as the expectation for additional FED easing recedes and the FOMC that meets on Tuesday will have to acknowledge improving fundamentals.

The only report that is due during the NY session is federal budget deficit that is expected to widen to USD 234 bln in February from previous USD 222.5 bln. The treasury will release it at 2 pm NY time.

There is a potential for CAD volatility at 12:30 pm NY time when BOC deputy governor Tiff Macklem speaks in Sao Paulo.

Please note that for the next two weeks the difference between NY time and London/GMT time is 4 hours instead of the usual 5 hours.

Fridays Premium trades include 2 new trades on EURUSD and 2 new on GBPUSD, 2 new on AUDUSD, 2 existing on EURGBP 2 new on US crude oil. For direct access to those trades and USDJPY warnings/ Jobless Techs, please click here: http://www.ashraflaidi.com/products/sub01/access/?a=614 Non subscribers click here: http://www.ashraflaidi.com/products/sub01/

Greece triggered CDS late on Friday but it was largely a non-event. In the US, continuing jobs growth helped to boost the dollar, which was the best performer. The impact of the US jobs report on EUR was as anticipated in the Monday & Wednesday Premium pieces. The euro lagged and CFTC data showed a renewed rise in short interest. Fridays Premium trades & charts are below.

After a long wait, the ISDA finally ruled that Greek collective action clauses were a credit event, triggering credit-default swaps. The market had plenty of time and forewarning to deal with the news and aside from modest selling in the stock market, it was not a factor.

The market-driver on Friday was news that the US added 227K jobs compared to the 210K reading expected. Revisions were also to the upside and the underlying metrics of the report were strong. In a departure from the risk on/risk off trade, the data provided a boost to the US dollar as QE3 expectations were pared. We expect the relationship between positive

US data and the dollar to continue.

Trade data was a minor USD negative as it the January deficit fell to the worst since 2008 on heightened energy imports. Hidden inside the report, however, was news that US machinery exports were at a three-year high a sign of a pickup in manufacturing.

The only currency to outperform USD on Friday was CAD, as it piggybacked on the economic strength of its neighbour and responded to a domestic employment report that saw the unemployment rate fall to 7.4% from 7.6%.

CFTC data showed euro shorts increasing to 116 after several weeks of declines to 110. The markets sharp turn against the yen continues as shorts grew to 19K, just over a month ago, the market was long 60K. AUD and NZD longs were pared while CAD longs increased to 26K from 22K.

For our Friday Premium Intermarket Trades, USDJPY warnings and Jobless Techs, pls click here: http://www.ashraflaidi.com/products/sub01/access/?a=614 Non subscribers click here: http://www.ashraflaidi.com/products/sub01/