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Dollar at Risk as Neutral China GDP Opens Door for Sentiment Recovery

By , Currency Strategist
13 July 2012 07:21 GMT

Talking Points

  • Neutral China GDP Report Clears Path for Risk Appetite Recovery
  • S&P 500 Futures Hint Dollar, Yen May Correct Lower into Week-End
  • US Bank Earnings, UofM Consumer Confidence Highlight Event Risk

The Australian and New Zealand Dollars outperformed in otherwise quiet overnight trade after second-quarter Chinese GDP figures printed broadly in line with expectations. Output grew at an annual pace of 7.6 percent, edging only slightly below economists’ median forecast of a 7.7 percent reading. The quarterly growth figure came in at 1.8 percent, a touch better than 1.6 percent expected.

On balance, the outcome appeared to have a net neutral impact on sentiment, offering no additional fodder to drive risk aversion. This opened the door for growth-geared assets and correlated currencies to stage a corrective recovery following yesterday’s blood-letting.

S&P 500 stock index futures are pointing higher in late Asian trade, arguing for more of the same ahead and hinting the safe-haven US Dollar and Japanese Yen may give back some of their recent gains into the week-end. The economic data docket is largely uneventful in European hours, with the preliminary estimate of July’s University of Michigan gauge of US Consumer Confidence closing out the week. Expectations call for a shallow uptick from the six-month low recorded in June.

Second-quarter earnings reports from JPMorgan and Wells Fargo may prove market-moving as traders look for evidence on the impact of Eurozone-linked jitters on market-wide financial conditions. Finally, Italy is due to sell bonds across 2015-2023 maturities after Moody’s downgraded the country’s credit rating once again overnight. Investors will keep an eye on average yield and bid-to-cover readings for signs of funding stress.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

2:00

CNY

Industrial Production YTD (YoY) (JUN)

10.5%

10.5%

10.7%

2:00

CNY

Industrial Production (YoY) (JUN)

9.5%

9.8%

9.6%

2:00

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (JUN)

20.4%

20.0%

20.1%

2:00

CNY

Retail Sales YTD (YoY) (JUN)

14.4%

14.3%

14.5%

2:00

CNY

Retail Sales (YoY) (JUN)

13.7%

13.4%

13.8%

2:00

CNY

Real GDP YTD (YoY) (2Q)

7.8%

7.9%

8.1%

2:00

CNY

Real GDP (QoQ) (2Q)

1.8%

1.6%

1.6% (R-)

2:00

CNY

Real GDP (YoY) (2Q)

7.6%

7.7%

8.1%

2:50

CNY

Business Climate Index (2Q)

126.9

-

127.3

2:50

CNY

Entrepreneur Confidence Index (2Q)

121.2

-

123

3:00

NZD

Non Resident Bond Holdings (JUN)

62.0%

-

61.7%

4:30

JPY

Capacity Utilization (MoM) (MAY F)

-2.2%

-

-0.6%

4:30

JPY

Industrial Production (MoM) (MAY F)

-3.4%

-

-3.1%

4:30

JPY

Industrial Production (YoY) (MAY F)

6.0%

-

6.2%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:15

CHF

Producer & Import Prices (MoM) (JUN)

-0.4%

-0.2%

Low

7:15

CHF

Producer & Import Prices (YoY) (JUN)

-2.2%

-2.3%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (JUN F)

0.2%

0.2%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (JUN F)

3.3%

3.3%

Low

8:00

EUR

Italian CPI - EU Harmonized (MoM) (JUN F)

0.2%

0.2%

Low

8:00

EUR

Italian CPI - EU Harmonized (YoY) (JUN F)

3.6%

3.6%

Low

9:00

EUR

Italy to Sell 2015-2023 Bonds

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2124

1.2246

GBPUSD

1.5323

1.5499

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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13 July 2012 07:21 GMT