Dollar, Yen Vulnerable on Euro Zone and US Economic Data

2012-05-15 05:55:00 Ilya Spivak, Head Strategist, APAC

Talking Points

Risks Skewed to the Upside for Euro, Aussie Dollar on Q1 Eurozone GDP Data
S&P 500 Index Futures Point Higher, Threatening US Dollar and Japanese Yen
Soft US Inflation and Retail Sales Numbers May Stoke Fed QE3 Expectations

The roundup of preliminary Eurozone GDP figures are in focus, with the region-wide reading expected to show output shrank 0.2 percent in the three months through March. This would mark the second consecutive period of contraction, putting the currency bloc in a technical recession. With the average value of the Euro against its top counterparts at four-month lows and net-short positioning among small speculators at a record high according to data from the CFTC, volatility risk looks to be to upside, with positive surprises likely to spark a bout of profit-taking.

An upside surprise on European growth readings may also prove supportive for risk appetite at large considering the Eurozone recession represents the most significant headwind facing global output as a whole this year, boosting the likes of the Australian, Canadian and New Zealand Dollars while punishing go-to safe havens including the US Dollar and Japanese Yen. May’s German ZEW survey of investor may marginally cap any emerging exuberance with forecasts calling for the first drop in sentiment in six months, but a souring outlook would hardly surprise most given the tone of recent news-flow and so may not prove meaningfully market-moving.

On the sentiment front, S&P 500 stock index futures are pointing firmly higher to reinforce the likelihood of a risk-on mood (albeit on a short-term, corrective basis). The US economic data set may further gains in sentiment-linked assets as headline CPI figures show the annual inflation rate slowed to 2.3 percent in April while Retail Sales grew at the weakest pace in four months, fueling Fed QE3 expectations. The Empire Manufacturing gauge of New York State factory-sector activity may offer a minor countervailing force on this front, with economists expecting a shallow rebound in May after the gauge sank to a five-month low in April.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
1:30	AUD	RBA May Meeting Minutes	-	-	-
1:30	AUD	New Motor Vehicle Sales (MoM) (APR)	-0.7%	-	4.1% (R+)
1:30	AUD	New Motor Vehicle Sales (YoY) (APR)	7.3%	-	4.0%
1:48	CNY	Actual FDI (YoY) (APR)	-0.7%	2.8%	-6.1%
3:00	NZD	Non Resident Bond Holdings (APR)	62.1%	-	60.9%
5:00	JPY	Consumer Confidence (APR)	40.0	40.8	40.3

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
5:30	EUR	French CPI (MoM) (APR)	0.2%	0.8%	Low
5:30	EUR	French CPI (YoY) (APR)	2.2%	2.3%	Low
5:30	EUR	French GDP (QoQ) (1Q P)	0.0%	0.1%	Medium
5:30	EUR	French GDP (YoY) (1Q P)	0.5%	1.2%	Medium
6:00	EUR	German GDP w.d.a. (YoY) (1Q P)	0.8%	2.0%	High
6:00	EUR	German GDP n.s.a. (YoY) (1Q P)	0.9%	1.5%	High
6:00	EUR	German GDP s.a. (QoQ) (1Q P)	0.1%	-0.2%	High
6:45	EUR	French Non-Farm Payrolls QoQ (1Q P)	-0.2%	-0.1%	Low
6:45	EUR	French Wages (QoQ) (1Q P)	0.7%	0.3%	Low
8:00	EUR	Italian GDP s.a. and w.d.a. (QoQ) (1Q P)	-0.7%	-0.7%	Medium
8:00	EUR	Italian GDP s.a. and w.d.a. (YoY) (1Q P)	-1.2%	-0.4%	Medium
8:30	GBP	Visible Trade Balance (£)	-8400	-8772	Low
8:30	GBP	Trade Balance Non EU (£)	-4700	-5017	Low
8:30	GBP	Total Trade Balance (£)	-2900	-3396	Low
9:00	EUR	Portugal GDP n.s.a. (YoY) (1Q P)	-3.1%	-2.8%	Medium
9:00	EUR	Euro-Zone GDP s.a. (QoQ)	-0.2%	-0.3%	High
9:00	EUR	Euro-Zone GDP s.a. (YoY)	-0.2%	0.7%	High
9:00	EUR	Portugal GDP s.a. (QoQ) (1Q P)	-1.0%	-1.3%	Medium
9:00	EUR	German ZEW Survey (Current Situation) (MAY)	39.0	40.7	High
9:00	EUR	German ZEW Survey (Econ Sentiment) (MAY)	19.0	23.4	High
9:00	EUR	Euro-Zone ZEW Survey (Econ Sentiment) (MAY)	-	13.1	Medium