[B]Talking Points
• Japanese Yen: Inflation Rises to Highest In a Decade
• Swiss Franc: USD/CHF Above 104, First time in Over a Month
• Euro: Breaks Below 1.5600 As Rate Hike Possibilities Decline
• Pound: Inline GDP Eases Recession Fears
• US Dollar: U of M on Tap[/B]
The Pound jumped over 150 basis points when Q1 GDP printed inline at 0.4%, despite the annualized rate falling to 2.5% from 2.8% - showing the economy grew at its slowest rate in three years. The Sterling found support after the less than abysmal numbers provided relief for traders, who feared the worst after the decline in March retail sales. The hope that the economy may resume growth in the later part of the year is being fueled by a pickup in manufacturing. However, the service sector which has been resilient slowed to 0.6%, the lowest since Q1 2005. The BoE’s recent £50 billion infusion of liquidity has led to speculation that the MPC may pause in their easing to give it an opportunity to influence the markets. The Pound which has been a little over sold is looking to test resistance at the 1.9850 price level.
The Euro fell below 1.560 against the dollar for the first time since March 03, as easing German import prices reduced European inflation concerns. The German Import price index in March fell to 0.4% from 1.1% the month prior, pulling down the annualized rate to 5.7% from 5.9%. The pair was trying to recoup some of the losses from yesterday before the data reinforced recent comments from ECB members trying to dampen expectations of a future rate hike. The pair was weighed further when Eurozone M3 money supply slowed to 10.3% from 11.3% the month prior, as loans to the private sector declined, reducing expectations for future growth. The region is starting to show signs of slowing as evidenced by the decline in German business confidence and if inflation concerns start to ease a future ECB Rate cut becomes more likely.
Japanese Inflation rose to highest level in a decade, which has raised the speculation that the BoJ may raise rates by year’s end. New Governor Shirakawa is noted for his belief that the steady increasing of interest rates is the key to fostering long-term growth. Nevertheless, the USDJPY rose above the 104 handle on increasing risk appetite
The University of Michigan Consumer Confidence survey is the only data on tap for the U.S. The measurement is a final reading and is expected to confirm the preliminary results that confidence is waning. However, the story of the day may be if U.S companies can continue their string of surprising earnings and the return risk appetite. The greenback and equities may start to feed off of each other as confidence is returning that the worst is over for the U.S. economy.
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