Column
5/6/2012 10:08:32 AM
Weekly Outlook (May 7 – 11)
Markets raised concern on economic growth on a series of missed expectation economic data last week. U.S. Non-Farm Payroll is at third consecutive declines. Even though, U.S. economy recovery is at moderate pace, FOMC members had suggested, in recent speeches, that Federal Reserve is unlikely to launch any stimulus in the near-term. US dollar may maintain its current strength in the coming weeks unless U.S. economic further deteriorates. Pay attention on Bernanke’s speaking on Thursday.
Similar situation in Euro Zone, economic data were weak and employment number had worsen, the March Unemployment Rate had reached 10.9%. In the Post Rate Press Conference, ECB Draghi had reiterated that there would be no near-term stimulus. On the other hand, markets are also nervous on the France and Greek elections this weekend. In France, if socialist challenger Hollande wins, he would be clear to re-negotiate the fiscal compact in EU and disapprove Merkel on austerity. In Greek, a majority government of at least 300 seats are needed for the dominant New Democracy to push through the austerity required by the bailout package. Technically, EUR is likely to remain in range with confirmed political stability. Markets pay close attention to the France and Greek elections results on Sunday Eastern Time.
U.K. was not isolated from bearish economic data; however, GBP technically maintains its strength. It is likely to continue retracement from the current high because the change of the market perception on its comparatively hawkish economy. Official Bank Rate and MPC Rate Statements after on Thursday are keys to the GBP direction.
Not much to discuss on CHF as SNB may intervene at any moment to weaken the currency.
CAD had benefited from the BOC’s hawkish statement of possible tightening monetary policy and withdrawing of stimulus early of last week; however, CAD strength had subsided on the following softer February GDP and the lowest Ivey PMI in nine months. Worse than expected U.S. Non-Farm payroll had further damaged the Canadian fundamentals and cause the USDCAD sharply rebounded. Technically, the severe rebound had put USDCAD back into its consolidation range.
RBA`s surprised 50 basis point cut and downgrade on both GDP and CPI outlooks last week obviously weaken the AUD. Technically, it had broken the consolidation and its weakness is likely to last on the coming weeks. Chinese Trade Balance and CPI y/y on Thursday may have impact on AUD if deviation is large comparing to consensus as China is the biggest trading partner for Australia.
Similarly, New Zealand Q1 employment Rate went up to 6.7%, the highest in five quarters. Employment Minister Joyce suggested a boosting in business confidence. Technically, it had broken the short-term consolidation and may continue its weakness. Same as AUD, closely watch Chinese Trade Balance and CP y/y on Thursday.
Not much coming up for JPY, USDJPY is expecting to consolidating around 79.63 – 81.00 in the coming week.
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