New Highs on Risk Assets do not tally with a falling USD

Posted On 26 Apr 2015
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New Risk Asset highs does not tally with a falling US$. Something has to give. The market is telling us that either the US$ restarts its ascent or that risk begins to correct. We favour the latter but capital preservation in these uncertain times is key. Throw in more Greek worries and the only certainty is uncertainty.
In last week’s summary we stated that the  announcement by the PBOC that it had cut its bank reserve requirement ratio by one percentage point effective from the beginning of the week would take risk higher. It did. Last week was a strong one for all risk assets with the S&P500 trading at new highs and the Nikkei 225 closing above 20,000 for the first time in 15 years.
Safe haven assets including precious metals were hit hard with both gold and silver closing at their lows for the week even though $ weakness persisted.
This week is light on the economic front with most activity in the USD.
USD: On Tuesday we have the Consumer Confidence number anticipated at 102.6.
Wednesday witnesses GDP thought to be 1%, the FOMC Statement and the Fed Funds Rate decision which is expected to remain unchanged at 0.25%.
We Thursday we have the customary Unemployment Claims figure estimated to show that a further 297,000 joined the ranks of claimants.
Friday we have the Manufacturing PMI number expected at 52.1.
EURONot much for the Euro with only two key items.
On Wednesday we have German CPI number which is expected to show a decrease of 0.1%. Deflationary pressures persist.
On Thursday we have the Eurozone CPI estimate thought to be 0.0%. Again no inflationary pressures at all.
GBP: Again only two data points for the GBP.
On Tuesday we have the GDP number expected at 0.5% and on Friday we have Manufacturing PMI expected at 54.6.
The most important factor affecting the GBP is the general election on the 7/5.
YEN: A good number of events this week for the Yen.
On Monday we have Retail Sales expected to show a contraction of 7.4%. Not good.
On Wednesday we have both the Industrial Production number thought to show a fall of 3.4%, again not good and the BOJ Monetary Policy Statement which is expected to maintain the QE programme.
Lots of news on Thursday when we have the BOJ Outlook Report  and the BOJ Press Conference.
Data wise we have Household Spending anticipated to show a contraction of 11.7%, Tokyo CPI at 0.5% and finally Average Cash Earnings at 0.4%.This figure measures the change in the total value of employment income collected by workers.
AUD: Also only two items for the AUD.
On Monday RBA Governor Stevens speaks and on Thursday we have the PPI figure thought to show a miniscule rise of 0.2%.
CNY: After last week’s flurry of activity for the CNY this week is quiet with only one item of note which is the release on Thursday of Manufacturing PMI expected to come in at a flat 50.0 indicating neither growth nor contraction.
Stay nimble. Good luck trading.

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