Kiwi inflation data fails to provide clarity on rate outlook

- New Zealand inflation data does not provide clarity on rate outlook: (NZ Q1 CPI QOQ: 0.5% V 0.6% expected; YOY: 2.5% V 2.6% prior, no revisions) The RBNZ governor Bollard recently said that he expected CPI to rise 0.3% in the quarter. Kiwi inflation came in stronger than Bollard expected, but slightly below analyst estimates, leaving the rate outlook murky. Upon the release of the data, the NZD/USD dropped to test first support at 0.7420, but spiked back up to pre-data levels. Traders focused on the underlying figures (NZ Q1 CONSUMER PRICE INDEX NON-TRADABLES +1.2% VS Q4) and pushed the NZD/USD to a post-flotation high above 0.7470. Whether the CPI data is strong enough to get the RBNZ to move next week remains to be seen, but there is a growing chorus of analysts that suggest the RBNZ will hold off but sound hawkish in their statement (waiting for data to see the impact of far tighter monetary conditions)

- Forex: The USD continued to trade lower in Asia after monthly CPI data reinforced the idea that the Fed could relax on inflation in the months to come. USD/CHF remains stuck in consolidative trading above 1.2029 support, while AUD/USD treads water ahead of next week's inflation data. The CAD remains well supported on strong economic fundamentals and a number of significant mergers and acquisition deals, but CAD moves may be limited ahead of the March inflation report. The KRW climbed to a new 15week high against the USD on gains on the local equity markets. Traders said that Korean authorities may start intervention when the market is tilted towards USD-short positions, but they don't seem to have a strong will to defend the 930 USD/KRW level. After today's inflation data out of the U.S. and the UK, June JGB bond futures hit a 3-month low and 10yr JGB bond yields hit a 2mnth high.

- Asian Equities: After Japanese ADRs traded down sharply during the U.S. session, the Nikkei 225 is higher by more than 0.60% and holding on to gains. Despite the lower USD/JPY, Japanese technology shares are leading the index higher after Intel's earnings report. Lehman Brother took a negative stance on Japanese chip equipment makers on DRAM concerns. Other winners on the Nikkei 225 included brokers and property-related shares. The Topix real estate index is higher by 2.9%. The KOSPI continues to trade near record levels and is higher by more than 0.25%. Samsung continues to lead semiconductor shares lower. The ASX 200 index once again hit a new all-time (above 6250) on gains in shares of BHP, Coca-Cola Amatil, Orica and banking shares. The Hang Seng index is lower by more than 0.20% on declines in shares of Hutchison Whampoa and PICC. Hong Kong equity traders are showing caution ahead of earnings releases and upcoming Chinese GDP data. Chinese equities are currently lower on declines in shares of Citic Securities.

- Aussie consumers worry about imminent rate hikes: (AU April Westpac Consumer Confidence MoM: -0.2% v 3.7% prior) WestPac said that consumer concerns about a possible rise in interest rates overshadowed otherwise positive news on the Aussie economy.

- Commodities: Crude oil is higher in Asian trading ahead of Wednesday's US inventories data and possible instability surrounding the Nigerian presidential elections. Nigerian opposition parties now demand the indefinite postponement of the presidential poll because they believe the poll is being affected by vote rigging. Spot gold is lower on profit taking after earlier reported U.S. core CPI rose less than expected. Shanghai Copper rose by its daily limit (4%) and to a new 10-month high after copper rose to an 8-month high in London on potential supply disruptions and U.S. housing starts data.