The Yen Strengthens Against The Euro

G10 Advancers and Decliners vs USD

Market Brief

Moody’s cut Ireland’s credit rating by two levels to Baa3 from Baa1 to the lowest investment grade with a negative outlook as the government struggles to plug the budget deficit and restore economic growth. Prospects for the nation have dimmed a bit as the nation lowered its economic growth forecast for 2011 and 2012 saying consumer demand remains subdued, GDP will grow 0.9% this year against 1% and 2.2% for 2012. On the other hand, Greece will announce measures today to meet its deficit reduction goals after the country’s bond yields hit new highs amid talks it may restructure its debt. Details of more than 22 Billion Euro of deficit-reduction measures through 2014 will be put up and the Greek government is expected to raise 15 Billion Euro by 2013 through asset-sales. The measures are aimed at meeting a target, agreed with the EU and IMF as a condition for the bailout, to cut the deficit to less than 3 percent of GDP by 2014 and a self-imposed goal of cutting the shortfall below 1 percent by 2015. The government is still aiming for a deficit of 7.4 percent of GDP this year, even as first-quarter revenue missed the target by 1.4 billion Euros. The EURUSD weakened after the downgrade news moving down to 1.4451 after reaching highs of 1.4503 earlier in the Asian session.

Inflation concerns have been haunting markets as Chinese CPI data exceeded expectations at 5.4% against 5.2% to the fastest pace since March 2008 and GDP rose 9.7% adding pressure for more monetary tightening. The central bank may boost reserve requirements for lenders as early as this evening to drain cash from the fastest-growing major economy and as food and commodity costs drove inflation higher than the government’s 2011 target for a third month. A jump in China’s foreign-exchange reserves to a world record $3 trillion, reported yesterday, highlighted the additional risk that inflows of capital may stoke inflation. Fitch Ratings cut the outlook for China’s local-currency sovereign debt rating to “negative” from “stable” this week, citing a likely deterioration in bank asset quality. Moody’s Investors Service lowered its outlook for the property sector to “negative” from “stable” on concern residential sales could decline by as much as 30 percent as local governments enforce housing curbs.

Currency action the Yen strengthening against majors after the Chinese data and Indian inflation data could prompt the nation to act to cool growth. USDJPY traded at 82.96, EURUSD at 1.4474, GBPUSD at 1.6353, AUDUSD at 1.0516. The Dollar could gain in strength as we head towards US inflation data this evening but positive data from EU w.r.t. inflation could keep the Euro buoyant.

EU inflation along with US inflation could be market movers along with Consumer confidence and Empire manufacturing in the US followed by Fed’s Evans speaking.

 TIME (GMT)

   EVENT

 VALUE NAME  

CONS.  

02:00 

  CN:GDP

Y/Y % Change

9.6  

02:00 

  CN:Consumer Price Index

Y/Y % Change

5.2  

M/M % Change

0  

02:00 

  CN:Industrial Production

Yr/Yr % change

14%  

02:00 

  CN:Producer Price Index

Y/Y % Change

7.2  

M/M % Change

0  

02:00 

  CN:Retail Sales

Y/Y % Change

16.5  

M/M % Change

0  

08:00 

  IT:Merchandise Trade

Level

E0B  

09:00 

  EMU:HICP

Year over Year

2.6%  

Month over Month

1.3%  

09:00 

  EMU:Merchandise Trade

Level

E-3.3B  

Imports-M/M

0%  

Imports-Y/Y

0%  

Exports-M/M

0%  

Exports-Y/Y

0%  

09:00 

  IT:CPI

Month over Month

0.4%  

Year over Year

2.5%  

12:30 

  US:Empire State Mfg Survey

General Business Conditions Index - Level

17.5  

12:30 

  US:Consumer Price Index

CPI - M/M change

0.5%  

CPI less food & energy

0.2%  

13:00 

  US:Treasury International Capital

Foreign Demand for Long-Term U.S. Securities

$0B  

13:15 

  US:Industrial Production

Production - M/M change

0.6%  

Capacity Utilization Rate - Level

77.3%  

13:55 

  US:Consumer Sentiment

Sentiment Index - Level

69