Key Points Japanese machinery orders weaker than expected. EUR-USD consolidating ahead of US data. UK CPI, Eurozone GDP, US CPI, NY Fed and TIC portfolio data feature today.
Market Outlook The JPY was shaken briefly overnight after surprisingly weak machinery orders reading. EUR-JPY edged up to 163.25 but has since pulled back and is holding shy of the 163.62 early May high. The 162.60-50 area should offer support today. Weaker global markets have helped the JPY to stabilise.
March core machinery orders unexpectedly declined 4.5%, following a revised fall of 4.9% in February, taking the level of orders below 1trln yen for the first time since May 2005. The smoothed trend is also faltering (see chart). Expectations were also poor with manufacturers forecasting that core orders will decline 11.8% q/q in Q2, after declining 0.7% in Q1. The government downgraded its assessment of machinery orders to 'somewhat weak'. It is the beginning of the new financial year, which means that businesses tend to be somewhat cautious in their forecasts. Actual orders have overshot the forecast for Q2 in each of the last three years. Still the weak reading does raise some concerns about the capital spending component of Q1 GDP, which is due Thursday.
EUR-USD nudged back to just shy of 1.3565 resistance overnight, with the USD consolidating ahead of the week's data releases. Leaning to upticks to 1.36 drawing out sellers. The 1.3520 level offers intra-day support, ahead of Friday's 1.3460 low. The EUR-GBP cross rate is holding resistance at 0.6846- 50 so far, awaiting the CPI data today. If that comes in as expected and tomorrow's BoE Inflation Report is less hawkish than the market expects (which seems likely), there will be some upside risk on EUR-GBP, but the 0.6867 mid-March highs will need to break to open topside towards 0.6920-60.
The UK RICS house price report unexpectedly picked up, with the house prices balance climbing to 28.9 in the three months to April, from 26.9 in March. However, enquiries from new buyers fell for the fifth successive month and surveyor confidence about the prospect for future sales fell to the lowest since September 2004. The sales-to-stock ratio eased for the first time since last May. The RICS said the rise in the number of properties coming onto the market in recent months may be due to homeowners wishing to avoid new regulations on sellers coming into effect from June. While prices remain strong, the lower buyer enquiries may encourage the belief that higher rates and the traditional summer lull will combine to calm things over coming months.
Day Ahead Eurozone - Q1 GDP numbers are due in the Eurozone, with data released so far this morning being slightly mixed. German GDP data came in stronger than expected, while French GDP was a touch below expectations. The German Statistics office noted that 'private consumption was a clear brake on growth', with the strength due to 'continued vigorous investment activity'. Eurozone CPI is also due, but something unusual will be needed to trigger any market reaction as both the headline and core indicators have been steady in recent months around 1.8% or 1.9%.
UK - April CPI data is due today and is expected to ease to 2.8% y/y from 3.1% in March. The market is forecasting the core number to hold flat at 1.9%. This will follow the relatively benign reading seen on yesterday's PPI output data.
US - CPI, the NY Fed survey, the NAHB housing index and TIC portfolio numbers are all due today. CPI will show whether last month's softer core outcome of 0.1% was a one-off or the beginning of a more subdued trend. A few months of weaker numbers will be required before the Fed considers softening its concerns over price stability. The NY Fed survey will be interesting to see whether it corroborates the strength seen in the latest ISM number. However, the Philly Fed on Thursday is likely to be more significant given the m/m volatility that can sometimes afflict the NY version.
Canada - manufacturing shipments are due today. Shipments have fallen back in Jan and Feb after the strength seen in Nov and Dec, so the underlying trend is not clear. The market consensus is for a rebound of 0.9%, after a national railway strike hampered activity in February.
Diary Data/event BST Consensus*
NO Trade balance (Apr) 09.00 NOK29.2bn IT GDP (Q1) q/q 09.00 0.2% GB CPI (Apr) y/y 09.30 2.8% GB CPI core (Apr) y/y 09.30 1.9% GB RPIX (Apr) y/y 09.30 3.6% GB RPI (Apr) y/y 09.30 4.5% EU GDP (Q1) q/q 10.00 0.5% US Chain store sls (w/e May 12) w/w 12.45 -0.6% last US Fed’s Bernanke spks 13.10 US CPI (Apr) m/m 13.30 0.5% US CPI core (Apr) m/m 13.30 0.2% US NY Fed index (May) 13.30 8.0 CA Manu shipments (Mar) m/m 13.30 0.9% US Redbook sls (w/e May 12) m/m 13.55 -4.1% last US TIC intl portfolio balance (Mar) 14.00 $74.3bn US NAHB housing index (May) 18.00 33 US ABC consumer conf (w/e May 13) 22.00 -3 last NZ PPI output (Q1) q/q 23.45 -0.5% last Latest data Actual Consensus* GB RICS house prices (Apr) 28.9% 24% JP Machinery orders – core (Mar) -4.5% 1.5% DE GDP (Q1) q/q 0.5% 0.3% FR GDP (Q1) q/q 0.5% 0.7% FR CPI (Apr, prel) y/y 1.3% 1.1% * Consensus unless stated
Disclaimer: All information on this web site is subject to change. The use of this web site constitutes acceptance
of our user agreement. All publisher financial articles at
FXtree.com are those of the individual authors and do not represent trading recommendations
of FXtree.com or its staff.
