Dollar, Yen Sink as Spain Secures Bailout and Chinese Exports Rise

2012-06-11 06:05:00 Ilya Spivak, Head Strategist, APAC

Talking Points

Spain Secures €100 Billion EU Bailout to Recapitalize Banking Sector
Chinese Exports Unexpectedly Accelerate, Denting Slowdown Fears
Dollar, Yen Vulnerable as S&P 500 Futures Point to Risk-On Mood

The US Dollar and Japanese Yen began the week sharply lower amid a broad-based recovery in risk appetite that sapped demand for the go-to haven currencies. The MSCI Asia Pacific regional benchmark equity index rose 1.9 percent, lifted by news that Spain successfully lobbied for a €100 billion EU aid package to recapitalize its banking sector.

The announcement downgrades the possibility of a credit squeeze in the event that a Spanish lender folded. The apparent absence of added austerity measures attached to the terms of the bailout reinforced the risk-on mood, hinting it will not compound Spain’s already deep recession and contribute to Eurozone-linked headwinds battering global output at large.

A supportive set of Chinese Trade Balance figures likewise amplified chipper sentiment trends, showing exports grew at the fastest pace in three months. The outcome hinted that the world’s second-largest economy and its top exporter may not be facing as deep of a demand slump as has been feared at the hands of the Eurozone recession.

Looking ahead, S&P 500 stock index futures are pointing firmly higher, hinting haven currencies will likely remain under pressure against their major counterparts. The economic calendar is relatively uneventful in Europe and empty in US hours, suggesting that little stands to disrupt established momentum in the near term (at least as far as scheduled event risk is concerned).

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
6/9 1:30	CNY	Consumer Price Index (YoY) (MAY)	3.0%	3.2%	3.4%
6/9 1:30	CNY	Producer Price Index (YoY) (MAY)	-1.4%	-1.1%	-0.7%
6/9 5:00	CNY	Industrial Production YTD (YoY) (MAY)	10.7%	10.8%	11.0%
6/9 5:00	CNY	Industrial Production (YoY) (MAY)	9.6%	9.8%	9.3%
6/9 5:00	CNY	Fixed Assets Inv Excl Rural YTD (YoY) (MAY)	20.1%	20.0%	20.2%
6/9 5:00	CNY	Retail Sales YTD (YoY) (MAY)	14.5%	14.6%	14.7%
6/9 5:00	CNY	Retail Sales (YoY) (MAY)	13.8%	14.2%	14.1%
2:55	CNY	Exports (YoY) (MAY)	15.3%	7.1%	4.9%
2:55	CNY	Imports (YoY) (MAY)	12.7%	5.5%	0.3%
3:00	CNY	Trade Balance ($) (MAY)	18.70B	16.25B	18.43B
22:45	NZD	Manufacturing Activity (1Q)	-1.8%	-	0.9% (R-)
22:45	NZD	Manufacturing Activity Volume s.a. (QoQ) (1Q)	0.7%	-	1.3%
23:01	GBP	Lloyds Employment Confidence (MAY)	-59	-	-59
23:50	JPY	BSI Large All Industry (QoQ) (2Q)	-3.1	-	-2.7
23:50	JPY	BSI Large Manufacturing (QoQ) (2Q)	-5.7	-	-7.3
23:50	JPY	Japan Money Stock M2 (YoY) (MAY)	2.1%	2.5%	2.6%
23:50	JPY	Japan Money Stock M3 (YoY) (MAY)	1.9%	2.2%	2.3%
5:00	JPY	Consumer Confidence (MAY)	40.7	39.8	40.0
6:00	JPY	Machine Tool Orders (YoY) (MAY P)	-2.9%	-	0.4%

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:45	EUR	French Industrial Production (YoY)	-0.3%	-0.9%	Low
6:45	EUR	French Manufacturing Production (YoY)	-0.9%	-0.3%	Low
6:45	EUR	French Manufacturing Production (MoM)	-0.7%	1.4%	Low
6:45	EUR	French Industrial Production (MoM)	-0.1%	-0.9%	Low
8:00	EUR	Italian Gross Domestic Product (QoQ)	-0.8%	-0.8%	Low
8:00	EUR	Italian Gross Domestic Product (YoY)	-1.3%	-1.3%	Low
9:30	EUR	Germany to Sell €4B in 6-mo Bills	-	-	Median
13:00	EUR	France to Sell €7.8B in 91-, 168- and 350-day Bills