NEWS / Foreign Exchange

All Eyes On US GDP Today

Considering the bear wave in USD lately, a strong GDP figure should cause some serious unwinding of USD shorts. Equities could transition into an implied growth view.

Overnight News Bullets

• UK Nat??™wide House price Apr, out at 0.9% vs. 0.6% exp.

• GE Import Price Index MoM/YoY Mar, out at 0.9%/0.6% vs. 0.8%/0.5% exp.

• GE GfK Consumer Confidence Survey May, out at 5.5 vs. 4.7 exp.

• SW Consumer Confidence Apr, out at 23.0 vs. 16.7 exp.

• SW PPI MoM/YoY Mar, out at 1.0%/5.2% vs.0.6%/4.7%

• NO Unemployment Rate Apr, out at 2.0% as expected.

• US Initial Jobless Claims Apr 21, out at 321K vs. 330K exp.

• US Continuing Claims Apr 14, out at 2594K vs. 2523K exp.

• US Help Wanted Index Mar, out at 30 vs. 31 exp.

• US EIA Natural Gas Storage Change Apr 20, out at 18 vs. 19 exp. 

• JN Jobless Rate Mar, out at 4.0% as expected.

• JN Job-To-Applicant Ratio Mar, out at 1.03 vs. 1.05 exp.

• JN Overall Hhold Spending Mar, out at 0.1% vs. 0.7% exp.

• JN Tokyo CPI Apr, out at 0.2% vs. -0.1% exp.

• JN Natl CPI Mar, out at -0.1% as expected.

• JN Industrial Production MoM/YoY Mar P, out at -0.6%/1.6% vs. 0.9%/3.3% exp.

• JN Large Retailers??™ Sales Mar, out at -1.1% vs. -0.9% exp.

• JN Retail Trade MoM/YoY Mar, out at -0.7%/-1.3% vs. -0.5%/-0.6% exp.

• JN Housing Starts Mar, out at 5.5% vs. -0.9% exp.

• JN Annualized Housing Starts Mar, out at 1.304M vs. 1.228M exp.

• JN Construction Orders Mar, out at -1.6% vs. 7.5% exp.

• JN BOJ Keeps Target Rate at 0.50% as expected.

Markets

• FX: Finally some USD Strength, TWU up 0.5% AUD generally weaker.

• Fixed Income: US rate curve steepens again, fixed income saw a solid down move again y??™day.

• Stocks: Wednesday??™s gains were consolidated, basic resource sectors hurt on metal weakness. Nikkei still slumping, down 0.3% o/n.

• Commodities: Metals market getting slammed on stronger USD. Crude oil rejected above $66/brl.

O/N Data Heat map:

Calendar

Today's Highlights:

This and Next Week??™s Highlights:

What's going on?

• A whopper of a day coming up with US GDP at 12.30 GMT. This data point is likely to impact all asset classes. Market expecting 1.8 pct. Which we think is too low judging from our EWEI. Considering the bear wave in USD lately, a strong figure should cause some serious unwinding of USD shorts and push fixed income to new lows.

• JPY finding renewed downside after lower then expected retail sales and CPI reading. EURUSD awaits US GDP Q1, with 1.3670 and 1.3575 as directional levels

• Equities: upon a stronger GDP figure, the broader market should transition into an implied growth view, i.e. Cyclicals, Financials to go higher, defensives lower on a relative basis. Healthcare and Pharma have rallied too far too fast and so it might be time for some retracement.

FX

• USDJPY leaving the tight range (118.25-119.05) from this week. A break above 120.00 would confirm more upside in the week to come, with Japanese data giving a helping hand.

• EURUSD still range bound as market awaits US GDP data. We believe estimates at 1.8% seems rather low, but a deviation of more then 0.3% is likely needed if volatility is to increase.

• BoJ??™s economic outlook shows very little change in language, where if everything seems to going on in a ???moderate pace???. NZD and AUD should benefit from this.