NEWS / Foreign Exchange

Positive inflation expectations in Japan

Carry Trades taking a hit on stories of positive inflation expectation in Japan, however not yet a massive unwinding expected. Look out for commodities if JPY sees additional strengthening.

Overnight News Bullets

• FR Current Account Feb,out at -3.3B vs -2.4B exp.

• UK Claiment Count Rate March, out at 2.9% as expected.

• UK Jobless Claims Change March, out at -9.2K vs -5.0K exp.

• UK Avg Earnings inc bonus 3M/YoY Feb, out at 4.6% vs 4.2% exp.

• UK ILO Unemployment Rate Feb, out at 5.5% as exp.

• EZ Construction Output Feb, out at 0.9% vs a prior reading of 0.6% exp.

• US Mortgage Apps April 13, out at -2.5% vs a prior reading of -0.4%.

• CA Int'l Securities Transactions Feb, out at C$4.835 vs -C$1.5000 exp.

• US DOE/API Crude Oil Inventories April 13, out at -3280K vs a prior reading of 1972K.

• JN Tertiary Industry Index Feb, out at 1.0% vs -0.5% exp.

• Toyko Dept. Sales (YoY) March, out at -1.5% vs a prior reading of 1.7%

Markets

• FX: JPY finally showing signs of strength across the board, CHF also stronger.

• Fixed Income: Beginning to look like a reversal, US rates broadly lower.

• Stocks: US Europe consolidated but Asia strongly lower Nikkei down 1.9% China 2.5%.

• Commodities: Precious metals beaten down, Energies range bound.

O/N Data Heat map:

Calendar

Today's Highlights:

This and Next Week??™s Highlights:

What's going on?

• Carry Trades getting hit after stories about positive inflation expectations in Japan. CHF also strengthening. This is justified from a Mean-Reverting perspective.

• Too early to expect massive unwinding of Carry Trades. Trend lines need to be broken and we need a more sustained move lower. So far, Carry Trades have shown a remarkable resilence to sell-offs with renewed interest in getting long. Buy short-term out of the money put options on the JPY crosses.

• JGB??™s looking toppish, despite strength in other Fixed Income products. Headed towards trend-line support around 129.50.

• Beware of silver. It could head significantly lower on JPY strength.

FX