· The dollar traded mixed on Tuesday. Investors worried about rising Chinese inflation and that the EU bailout package will not halt the Greek contagion risk. US small business optimism and wholesale inventories increased more than expected. The yen rose as equity prices fell. The S&P 500 declined 3.94 to 1,155.79. The euro fell for the first day in three on worries European high-debt countries will struggle to contain deficits. The Australian dollar depreciated on concerns China will tighten its monetary stance amid accelerating Chinese inflation. The Canadian dollar was little changed at the 1.02 support.
· The GBP/USD rose after UK PM Gordon Brown said he will resign, paving the way for Conservative leader David Cameron to succeed him. Cameron accepted the Queen’s invitation to form Britain’s next government, which will be a coalition government with the Liberal Democrats. The GBP/USD was also supported by stronger-than-expected UK manufacturing output and home prices. The pair remains in a clearly defined downtrend. Resistances are in the 1.50 and 1.53 areas. There is support in the 1.48 area. If the resistance from this year’s downtrend is broken, the GBP/USD outlook will improve.
Financial and Economic News and Comments
US & Canada
· The US NFIB small business optimism index increased to a higher-than-expected 90.6 in April from 86.8 in March, indicating US small business optimism improved last month and ending seven consecutive quarters of below 90 readings, according to data from the National Federation of Independent Business. The sales expectations measure increased to 6 in April from -3 the prior month.
· US wholesale inventories were up a slightly more-than-expected 0.4% m/m to $394.8 billion in March, a third consecutive monthly increase, after a 0.6% m/m advance in February, figures from the Commerce Department showed, signaling sustainable US economic growth. Wholesale sales rose 2.4% m/m to $348.0 billion, a 12th straight monthly gain, following February’s upwardly revised 1.2% m/m rise. The inventories/sales ratio declined to 1.13 in March from 1.16 the prior month, compared with March 2009’s 1.39. Inventories fell 5.3% y/y in March while sales rose 15.8% y/y.
Europe
· Germany’s consumer prices slipped 0.1% m/m in April, the first month-on-month decline in three months, after a 0.5% m/m increase in March, final April CPI data from the Federal Statistical Office showed. The consumer-price inflation rate slowed to 1.0% y/y from March’s 1.1% y/y. The harmonised index of consumer prices (HICP), calculated for European purposes, declined 0.1% m/m in April after a 0.6% m/m advance in March. The HICP rate slowed to 1.0% y/y from March’s 1.2% y/y.
· German wholesale prices rose a more-than-expected 1.7% m/m and 6.0% y/y in April after increases of 1.3% m/m and 4.3% y/y in March, data from the Federal Statistical Office showed.
· In March, UK industrial production increased a more-than-expected 2.0% m/m and 2.0% y/y and manufacturing production grew a more-than-anticipated 2.3% m/m and 3.3% y/y, according to data from the Office for National Statistics.
Asia-Pacific
· China’s consumer prices rose 2.8% y/y in April after a 2.4% y/y increase in March, the statistics bureau said. Property prices climbed 12.8% y/y in April. New lending totaled 774 billion yuan, the People’s Bank of China said.
FX Strategy Update
| EUR/USD | USD/JPY | GBP/USD | USD/CHF | USD/CAD | AUD/USD | EUR/JPY | |
| Primary Trend | Positive | Negative | Negative | Positive | Negative | Positive | Negative |
| Secondary Trend | Negative | Positive | Negative | Positive | Negative | Neutral | Neutral |
| Outlook | Negative | Positive | Neutral | Positive | Positive | Negative | Negative |
| Action | Sell | None | None | Buy | None | None | None |
| Current | 1.2680 | 92.70 | 1.4956 | 1.1104 | 1.0211 | 0.8965 | 117.55 |
| Original Position | 1.4628 | N/A | N/A | 1.0340 | N/A | N/A | N/A |
| Objective | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Stop | 1.3625 | N/A | N/A | 1.0465 | N/A | N/A | N/A |
| Support | 1.2600 1.2500 | 90.00 88.00 | 1.4800 1.4500 | 1.0900 1.0500 | 1.0200 0.9950 | 0.8800 0.8500 | 114.00 110.00 |
| Resistance | 1.3000 1.3300 | 93.50 94.50 | 1.5050 1.5350 | 1.1300 1.1500 | 1.0600 1.0800 | 0.9400 0.9600 | 120.00 126.00 |
Wednesday’s Economic Calendar
| Time (EDT) | Region | Data | Period | Change | Forecast | Previous |
| 1:00 | Japan | LEI | Mar P | 98.5 | ||
| 1:00 | Japan | Coincident index | Mar P | 100.5 | ||
| 2:00 | Germany | GDP sa | Q1 P | q/q | 0.0% | 0.0% |
| 2:00 | Germany | GDP wda | Q1 P | y/y | 1.1% | -2.4% |
| 2:00 | Germany | GDP nsa | Q1 P | y/y | 1.2% | -1.7% |
| 3:15 | Switzerland | Producer & import prices | Apr | m/m | 0.4% | 0.5% |
| 3:15 | Switzerland | Producer & import prices | Apr | y/y | 0.6% | 0.0% |
| 4:30 | UK | Jobless claims change | Apr | -20.2K | -32.9K | |
| 4:30 | UK | Claimant count rate | Apr | 4.8% | 4.8% | |
| 4:30 | UK | ILO unemployment rate – 3 mths-3mths | Mar | 8.0% | 8.0% | |
| 4:30 | UK | Average weekly earnings including bonus – 3 mths-3mths | Mar | y/y | 2.2% | 2.3% |
| 4:30 | UK | Average weekly earnings excluding bonus – 3 mths-3mths | Mar | y/y | 2.0% | 1.7% |
| 5:00 | EMU | GDP sa | Q1 A | q/q | 0.1% | 0.0% |
| 5:00 | EMU | GDP sa | Q1 A | y/y | 0.4% | -2.2% |
| 5:00 | EMU | Industrial production sa | Mar | m/m | 1.1% | 0.9% |
| 5:00 | EMU | Industrial production wda | Mar | y/y | 4.1% | |
| 5:30 | UK | Bank of England quarterly inflation report | ||||
| 8:30 | Canada | International merchandise trade | Mar | C$1.6B | C$1.4B | |
| 8:30 | Canada | New housing price index | Mar | m/m | 0.3% | 0.1% |
| 8:30 | US | Trade balance | Mar | -40.0B | -39.7B | |
| 14:00 | US | Monthly budget statement | Apr | -$65.4B | ||
| 19:50 | Japan | Trade balance – BOP basis | Mar | ¥778.0B | ||
| 19:50 | Japan | Adjusted current account total | Mar | ¥1119.0B | ||
| 19:50 | Japan | Current account total | Mar | ¥2212.5B | ¥1470.6B | |
| 21:30 | Australia | Participation rate | Apr | 65.1% | ||
| 21:30 | Australia | Unemployment rate | Apr | 5.3% | 5.3% | |
| 21:30 | Australia | Employment change | Apr | 23.0K | 19.6K |
Notes: N/A=not applicable/not available, ar=annual rate, sa=seasonally adjusted, nsa=non-seasonally adjusted, wda=working days adjusted, 3 mths=3 months, m/m=month-on-month, q/q=quarter-on-quarter, y/y=year-on-year, ytd=year-to-date, m=million, b=billion, t=trillion, unch=unchanged, a=advance, p=preliminary, r=revised, f=final, GDP=gross domestic product, LEI=leading economic indicators index, CPI=consumer price index, PPI=producer price index, PMI=purchasing managers index
Hans Nilsson and Winnie Tapasanun
New York, May 11, 2010, 16:15 EDT
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