Negative Growth? No Problem. Onto Japan Data

The market was nonchalant about a disappointing revision to Q1 US GDP. The antipodean trade broke out as AUD led the way and NZD lagged. Up next is a big day for Japanese data with CPI, employment and industrial production.

The Q1 GDP report was the worst since 2011 as the economy contracted 1.0%, worse than the 0.5% expected. You wouldn't know it from the market reaction as the S&P 500 rallied 0.5% to a fresh record and the US dollar hardly wavered.

Part of the reason is that an inventory drawdown and trade was the major drag and much of that will be reversed in the current quarter. Other data was also solid with initial jobless claims slipping to 300K compared to 318K expected.

The most notable market move was AUD/NZD as it broke above the Feb and April highs to the best levels this year. Outside of FX, the Treasury market showed signs of a turnaround; after falling to 2.40% the 10-year yield closed higher on the day at 2.46%.

Looking ahead, Fridays are typically slow in the Asia-Pacific region but not this one. It begins at 2330 GMT with Japanese April CPI which is expected at 3.4% y/y because of the consumption tax hike. Look for about 1.5% when that is stripped out.

At the same time the unemployment rate is expected to remain steady at 3.6%.

Twenty minutes later April industrial production is expected down 2.0% m/m in April.

There is also a sprinkling of lower tier data from Australia and New Zealand, Japanese housing starts and a speech from Fed hawk George.