Intraday Market Thoughts

Risk Rally Sees No Follow Through; CPI Is Next

by Patrik Urban
Feb 17, 2012 13:17

Currencies consolidate; German PPI rose m/m but fell y/y; UK retail sales strong; Canadian CPI rose; German president resigns. Market turns to CPI and leading indicators. A new set of Premium trades is issued, focusing on oil, S&P500 mini & EURUSD. See details below.

The USD is little changed, trading within a narrow range. European equities are gaining about 1% and the relative strength loser is again JPY.

Reports that the ECB would swap its Greek bond holdings of roughly EUR 40 bln for newly issued debt combined with higher confidence that the Greek bailout would be signed on Monday boosted risk appetite yesterday. Even though retracements have been shallow, there has been no follow through and most currencies trade in a narrow range.

The common currency is little changed compared to yesterday's close despite comments from ex-IMF official Prasad who said that Greece will eventually exit the Eurozone.

Annual German PPI rose 0.6% from -0.4% m/m but declined in January to 3.4% from 4%. Sharply higher energy and natural gas prices contributed to the monthly increase.

UK Retail sales rose 0.9% from 0.6% in January significantly better than -0.3% forecast. The outlook remains uncertain due to worsening labor market and ongoing austerity measures but today's data brought back hopes of growing economy for Q1. GBPUSD rose after the release to 5860 but there has been no follow through.

Canadian CPI rose 0.4% in January from -0.6%. Core CPI rose 0.2% from -0.5%. USDCAD trades at session lows around 0.9950.

In other news, Germany's president Christian Wulff announced his resignation today over a home loan scandal and ECB deposits rose on Thursday to EUR 416.73 from Wednesday's EUR 391.55 bln.

Consumer inflation is due at 8:30 am ET and it is expected to rise in January 0.3% from previous unchanged reading m/m but decline to 2.8% from 3% y/y. Core CPI should rise 0.2% from 0.1% m/m and remain steady at 2.2% y/y.

January leading indicators are due at 10:00 am and are seen marginally higher at 0.5% from 0.4%.

GBP volatility could increase at 2:00 pm when MPC member Adam Posen speaks at the economic summit in Warwick.

The latest Premium Intermarket Insights focus on oil and the euro & S&P500 mini, while maintaining existing trades on USDCAD, AUDNZD and gold. To go directly to the piece, click here: Nonsubscribers can click here


Latest IMTs