Intraday Market Thoughts

USD Deepens Selling, Yen Gets Moving, China PMI on Deck

by Adam Button
Jan 20, 2012 1:27

Improving US economic data and yield differentials sparked a flight from the Japanese yen. Euro shorts continued to cover, sparking a rally to 1.2970. The HSBC China PMI is the highlight of the Asia-Pacific session. Latest Intermarket Insights due at approx 2:15 GMT.

USD/JPY climbed above 77.00 and EUR/JPY rebounded to 100.00 and GBP/JPY edged closer to 120.00 as yen longs were covered. Partly driving the trade was a rise in bond yields prompting overseas investors to cycle out of JPY.

US economic data continues to paint an improving picture. Weekly jobless claims fell to 352K from 402K in the largest one-week drop in four years. Earlier positive readings on US jobs were brushed aside due to potential seasonal distortions but this data point signals a true (if modest) improvement.

Other indicators were mixed. The Philly Fed slipped to 7.3 from 10.3 in January but employment improved modestly. Housing starts were downcast, slipping 4.1% compared to the -0.7% expected.

Speculation about a haircut deal in Greece continues to swirl. The IIF said Thursdays talks were productive and the framework for a deal appears to be coming together.

In Ireland, the government released deficit figures that were better than expected. The troika concluded a review and announced the next tranche of aid will be approved.

In Portugal, however, the situation continues to deteriorate. Bond yields and credit-default swaps hit fresh record highs once again.

Asia-Pacific Preview

The event to watch in the upcoming session comes at 02:30 GMT as HSBC releases its flash estimate on Chinas PMI. In the past several months, this indicator has spark a significant round of trading. Other events on the calendar include Australian import/export prices (0030 GMT) and Japanese leading indicators (0500 GMT).


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