German Data Disappoints, Moody's Thinks about UK Rating

Risk aversion is back and USD is stronger against most counter parts after a downbeat statement from FED chairman Bernanke yesterday. Euro is on the weak side after German data disappointed. Market turns to the Beige book and later in the afternoon to the RBNZ rate decision. Moody's issues cautionary note on UK outlook.

German trade balance in April came out weaker at 12B compared to previous 15.1B which was worse than expected 14B. Industrial production in Europes biggest economy fell in April -0.6% from previous +1.2%. This reading marks the fourth consecutive month of deterioration. EZ Q1 GDP was confirmed at 0.8% and 2.5% y/y.

High volatility was seen across GBP pairs when Moodys senior analyst Sarah Carlson told MNI the UK could lose its prized AAA rating. Moodys spokesman subsequently clarified that UK downgrade is not Moodys central scenario. Recall earlier this week, Chancellor Osborne said he rejected calls for a Plan B to scale back his deficit-reduction plan. Meanwhile. the IMF cautioned over UK growth and employment outlook, but still recommended the BoE should raise rates. Our Premium service did point to rising Short Sterling interest contracts, pointing to eroding chances of UK rate hike.

OPEC decision has been postponed to about 14:00 GMT. Ashraf will make CHANGES TO THE US CRUDE TRADE in today's Premum "Intermarket Insights" later this afternoon.

At 2:00 pm the Federal Reserve releases its Beige Book report. Beige Book provides evidence supplied by Federal Reserve banks regarding their district economic conditions and is used in upcoming FOMC rate decision on June 22nd.

New York session will close at 5:00 pm when the RBNZ announces their rate decision. The cash rate is expected to hold rates steady at 2.5%