Dollar, Yen Aim Higher As S&P 500 Futures Point To Risk Aversion

By Ilya Spivak, Currency Strategist

Talking Points
  • Dollar, Yen to Extend Gains as S&P 500 Futures Point to Risk Aversion
  • European Commission Forecasts May Compound Negative Sentiment
  • UK PPI Drop May Weigh on British Pound as Traders Rethink BOE Bets

The US Dollar and Japanese Yen advanced against their major counterpartsovernight as Asian stocks declined, boosting demand for the go-tohaven currencies. The MSCI Asia Pacific benchmark index fell closeto 1 percent, with pressure from news that JPMorgan suffered ahefty $2 billion trading loss in synthetic credit securities thatproved to be riskier than expected compounded by deeply disappointing Chinese industrial production figures . S&P 500 stockindex futures are trading sharply lower, hinting more of thesame is likely ahead amid continued risk aversion.

The economic calendar is relatively quiet inEuropean hours. The final revision of April’s German CPI reading is expected to keep headline inflationat 2 percent, unchanged from initial estimates. Barring asignificant deviation from expectations, traders are likely to lookahead to an updated set of economic growth projections fromthe EuropeanCommission after yesterday’s ECB monthly report painted a dour picture.

Professional forecasters polled by the centralbank slashed their bets on economic growth but upgraded the outlookfor inflation in 2012 and 2013, hinting at that the ECB will not bequick to offer stimulus even as slump deepens. If theCommission’s estimates strike a similar tone, the outcome mayprove negative for overall risk appetite (and thereby for stocks-linked currencies ) considering the Eurozone recession presentsthe most significant headwind facing global output.

UK PPI figures are expected to show wholesaleinflation slowed to 2.9 percent in April, the weakest sinceNovember 2009. The result may weigh a bit on the British Pound , hinting that easing price pressure in thepipeline will translate into lower headline consumer prices in themonths ahead, giving the Bank of England room to reconsideradditional easing after the economy entered into a technicalrecession in the second quarter. Policymakers shied away from topping up asset purchases yesterday, presumably on inflationaryconcerns.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

NZ Card Spending - Retail (MoM) (APR)

0.8%

0.5%

0.3%

22:45

NZD

NZ Card Spending (MoM) (APR)

0.6%

0.5%

-0.1% (R+)

22:45

NZD

Food Prices (MoM) (APR)

-0.1%

-1.0%

23:50

JPY

Japan Money Stock M2 (YoY) (APR)

2.6%

2.9%

3.0%

23:50

JPY

Japan Money Stock M3 (YoY) (APR)

2.3%

2.5%

2.6%

1:30

CNY

Consumer Price Index (YoY) (APR)

3.4%

3.4%

3.6%

1:30

CNY

Producer Price Index (YoY) (APR)

-0.7%

-0.5%

-0.3%

5:30

CNY

Industrial Production (YoY) (APR)

9.3%

12.1%

11.9%

5:30

CNY

Industrial Production YTD (YoY) (APR)

11.0%

11.7%

11.6%

5:30

CNY

Retail Sales YTD (YoY) (APR)

14.7%

14.9%

14.8%

5:30

CNY

Retail Sales (YoY) (APR)

14.1%

15.1%

15.2%

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (APR)

20.2%

20.4%

20.9%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German CPI (MoM) (APR F)

0.1%

0.1%

Medium

6:00

EUR

German CPI (YoY) (APR F)

2.0%

2.0%

Medium

6:00

EUR

German CPI - EU Harmonised (YoY) (APR F)

2.2%

2.2%

Medium

6:00

EUR

German CPI - EU Harmonised (MoM) (APR F)

0.2%

0.2%

Medium

8:30

GBP

PPI Input n.s.a. (YoY) (APR)

2.1%

5.8%

Low

8:30

GBP

PPI Input n.s.a. (MoM) (APR)

-0.9%

1.9%

Low

8:30

GBP

PPI Output n.s.a. (YoY) (APR)

2.9%

3.6%

Medium

8:30

GBP

PPI Output n.s.a. (MoM) (APR)

0.4%

0.6%

Medium

8:30

GBP

PPI Output Core n.s.a. (MoM) (APR)

0.2%

0.1%

Low

8:30

GBP

PPI Output Core n.s.a. (YoY) (APR)

1.9%

2.5%

Low

9:00

EUR

EC Releases Economic Growth Forecasts

-

-

High

9:00

EUR

Italy to Sell 92- and 364-day Bills

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2839

1.2968

GBPUSD

1.6050

1.6188

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/05/11/Dollar_Yen_Aim_Higher_as_SP_500_Futures_Point_to_Risk_Aversion.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

More from Currencies

Markets Wobble as U.S. Readies More China Tariffs

Markets Wobble as U.S. Readies More China Tariffs

Watch These Two Crypto Experts Fiercely Debate the Future of Regulation

Watch These Two Crypto Experts Fiercely Debate the Future of Regulation

Bitcoin Today: Prices Attempt to Rally Following Early Weakness

Bitcoin Today: Prices Attempt to Rally Following Early Weakness

Ether Prices Rally After SEC Director Says He Doesn't Consider It a Security

Ether Prices Rally After SEC Director Says He Doesn't Consider It a Security

ECB's Mario Draghi Delivers a Masterclass in Monetary Policy

ECB's Mario Draghi Delivers a Masterclass in Monetary Policy