Daily Market Color 05/07/2013

Daily Market Color

05/07/2013

Economic Reports &Headlines

Last night, the PMI composite in Japan disappointed and came in lower than expected, 51.8 Vs 53.2.

The central bank of Australia surprised markets with an unexpected rate cut of 25bps. This cut brought the bank’s key rate down to a record low of 275bps.

Industrial production in France came in lower than expected for March on a month over month basis, -90bps Vs -20bps.

The trade deficit in France, for March, came in better than expected, -5.6bn Vs -4.7bn.

Manufacturing orders in Germany, for March, surpassed consensus by a wide margin on a monthly basis, 220bps Vs -50bps.

Future Reports

Later on this evening we will get a read on Chinese trade. Consensus is calling for a $14bn surplus in April.

Tomorrow at 6:00am, Germany will issue industrial production figures. Economists are forecasting a 10bps month over month increase for March.

Later on tomorrow evening we will get a read on consumer prices in China. Analysts are expecting a year over year increase in consumer prices of 2.2%.

Over in Australia, markets will get April’s Labor Force Survey. The jobless rate is expected to remain flat for the month.  

    

Trades

My forecast is that the Yen could possibly break the pivotal 100 level within the next three weeks. The possibility is contingent upon any surprise in the following reports: Japan's Producer Price Index on May 13th, Japan's Tertiary Index on May 14th, Japan's GDP on May 15th and BoJ's policy announcement on May 21st. 

The last two reports, GDP and BoJ's announcement, could finally reignite the downward trend in the Yen and push the currency to new lows. In addition to that, the US economic calendar for the next few weeks should be uneventful. There are hardly any reports being released within the next three weeks that merit significant attention. And when I say significant, I am talking of the reports' significance in reversing the long term trend in global risk assets. Therefore, the probability is low for the Yen to be used as a safe haven asset within the coming weeks.

The Aussie dollar on the other hand appears to be in play after speculation that George Soros is planning to short the Aussie. The Reserve Bank of Australia also contributed to further weakness in the Aussie with their surprise rate cut yesterday evening. Central banking officials cited low inflation, poor retail sales and sub-par employment as the reason to the rate cut. Moving forward, consumer price reports, retails sales reports and Labor Force Survey reports might be under more scrutiny as a result of RBA’s commentary that explained their rationale for the cut. I will remain long US equities and I will continue to look for more trading opportunities.