High demand of risk-denominated assets despite Disappointing Inflation releases across the biggest economies

Tom Tong17/Apr/2013Currency Updates

GBP

The Sterling suffered a volatile session yesterday against its largest rival currencies, increasing against the dollar but sinking against the euro, due to key inflation indicators figures release.
Last month, both the CPI and the PPI decreased slightly by 0,1% from their consensus, but remained very high at 2.8% and 2,0% respectively, in the annualized rate, damping sings that the target for asset purchases at 375 billion pounds will be increased.
Today, traders and more longer-term investors will be highly focused to the Bank of England Minutes, as the Monetary Policy Commitee might show a more hawkish tone within its board participants, as the growth rate is giving some signs of economic recovery in the UK and the well above inflation rate was confirmed yesterday.

EUR

The Euro dropped first but then hiked the most in two weeks after the close in the London session despite the disappointing macro data issued yesterday. The Eurostoxx Index dropped 0.59% and the DAX30 0.38% as German investor confidence dropped more than expected.
German current situation and economic situation decreased aggressively for the first time in several months, as ZEW Institute explained the unresolved debt crisis had spurred uncertainty in the market and the indicator was consistent with weak economic data.
Some good news did emerge from Greece, the Eurozone’s most troubled country, as its finance Minister Stournaras stated the Greek economy was regaining trust after the government completed two thirds of the fiscal adjustments.

USD

The USD Index dropped significantly after inflation data, as well as the International Monetary Fund (IMF) cutting its global economic growth forecast for 2013 from the 3.5% predicted in January to 3.3%. Main equity indexes, like the S&P 500 and the Dow Jones rose an average of 1,4%.
Looking at the big box of macro data issued yesterday, the most impacting was the Industrial production, which registered a much larger than forecast rise in the last month, showing an expansion of 0.4% from a consensus of 0.2%.
Deterioration of key American inflation measures, especially the Consumer Price Index which fell harshly 0.5% in March from its previous month to a yearly rate of 1.5%, is meaning domestic demand is losing its momentum. There is mixed bias on the macro data of the American real estate sector, as Housing starts of March have come in much stronger than were estimated, at 1.036M (YoY) from a consensus of 0.93M. US housing permits, on the other hand, undershot expectations after showing 40k less than expected.
The Beige Book will be released at midday in New York, and basically reports on the current US economic situation and gives a picture of the overall US economic growth expectations through a survey, compiling information of the analysis from economists.

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Written by Tom Tong

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