Intraday Market Thoughts

Obama and Australian CPI on Deck, Euro Stationed Above at $1.30

by Adam Button
Jan 24, 2012 23:21

Obama and Australian CPI on Deck, Euro Stationed Above at $1.30

The euro fell to 1.2954 in early US trading only to storm back at the European close, finishing the day at 1.3022. GBP led and JPY lagged. Asia-Pacific trading will be busy with Australian CPI, Japanese trade balance and the State of the Union address. Monday nights Premium trades were aimed at previewing Tuesdays action as well as Wednesday into the FOMC decision.

Euro losses came as the IMF downgraded its global growth forecast to 3.3% from 4.0% three months ago but optimism about Europe turning a corner continues to build.

The IMF is leaning on the ECB to take some losses on Greek bonds. So far the ECB has insisted on full repayment while asking private lenders to swallow losses.

Canadian retail sales increased 0.3% in Nov compared to the 0.4% expected. We are cautious because if US trends were any indication, late-November sales simply pushed spending forward and Dec numbers will be soft.

The S&P 500 ended a five-day winning streak, falling 0.1% to 1314 but those gains were easily erased when Apple announced astounding profits in Q4.

Japan is expected to announce its sixth monthly trade deficit of the year when it releases December data. Yen sentiment is beginning to shift toward the negative and long-term JPY shorts are compelling. The 2011 calendar year will be the first annual trade deficit for Japan in 30 years. Expectations are for a 170B yen in December and we may see a slight JPY reaction to the figures.

At 0030 GMT, the highly-anticipated Q4 Australian CPI figures will be released. The OIS market is pricing in an 80% chance of a 25bps cut on Feb 8 and there could be a major swing based on this data. Expectations are for a +0.2% q/q reading and +3.3% y/y. The trimmed mean is expected +0.5% q/q and +2.4% y/y. The Australian dollar could easily move 50 pips on this release in the event of a miss.

Pres Obama delivers his State of the Union speech at 0200 GMT. The main theme will be taxes, which is not a particularly market-moving topic. Although the market had a short fling with US long term debt issues in the summer; that sentiment has passed. We will be looking for comments on spending, specifically any type of stimulus that will pump up near term growth.

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