The decline of only 3K in US weekly jobless to 339K following the prior week??™s jump may prove disappointing for the already jittery markets. There we expectations that claims would fall by some 20K after the prior week??™s surge was deemed to be a result of Good Friday Holiday related effects.

Carry trades are unwound throughout global markets a equities sell off across the board after a higher than expected 11.1% rise in China??™s Q1 GDP raised nervousness of further interest rate hikes in China, thus, possibly risking a slowdown in global demand. China ??™s benchmark stock index fell to as low 4.7%, triggering subsequent declines in Asia and Europe . We had warned in our Wednesday evening note ??? China ??™s GDP May Threaten Carry Trades??? of the risk to the prolonged carry trades in the event of another China-driven global sell-off.   The unwinding is taking place as the Japanese yen is rallying across the board, while higher yielding currencies such as the sterling, Aussie and Kiwi are all selling off. GBPUSD is now testing just above the $2.0 level, falling from as high as 2.0094, while gold is off by more than $5.00 per ounce to $685 per ounce.

Markets shift attention to a string of US releases; US weekly jobless claims (8:30 am), March US leading indicators (10 am) and the April Philadelphia Fed survey (12 pm) will be highly scrutinized.  

The Leading indicators index is expected to have risen 0.1% in March after declining 0.5% and 0.3% in February and January respectively. Rising equities and falling jobless claims may have contributed to the rebound but a negative figure would be an unwelcome surprise to the already shaky sentiment in the midst of the China-driven declines in global equities.

The day??™s more important report will be the 12 pm release of the Philly Fed activity index on manufacturing, expected to have edged up to 2.0 in April from 0.2. Markets will especially watch the sub components on new orders and employment, both of which edged up to 1.9 from -0.5 and to 2.3 from -0.4.   A decline in the prices paid index to below 15 from 21.8 would be dollar negative in the event that the headline figure comes in below 3.0.

USDJPY seen stabilizing at key 117.50 support

Euro to fare better than sterling

Sterling struggles above $2.0

USDCAD breaks to fresh 5-month lows on CPI