Intraday Market Thoughts

China CPI Heats up, EUR Regains 1.33, Onto BoE

by Adam Button
Feb 9, 2012 9:07

A Greek deal continues to inch forward but there was no major breakthrough. EUR and USD were the top performers Wednesday with GBP lagging. Early in the Asia-Pacific session, the kiwi slipped on employment data; later Chinese inflation dimmed rate cutting hopes. The focus on Greece will be temporarily preempted by the ECB and BOE decisions. We have a new set of Premium trades, including 2 on EURGBP. The first EURUSD long hit all targets.

Greek political leaders continue to meet and are expected to approve austerity measures that will open the way to bailout funds. A draft deal promises permanent spending cuts, lowering the minimum wage by 20% and state-asset sales. The rise in the euro on the crosses reflected optimism that the austerity is sufficient to balance Greeces books.

Eurozone finance ministers and the IMF will meet on Thursday with the aim of ratifying the aid for Greece.

In the fourth quarter, New Zealands unemployment rate fell to 6.3% from 6.6%. The consensus was for a decline to 6.5% but the headline doesnt tell the whole story. The economy added fewer jobs than expected, climbing 0.1% vs 0.4% expected. The culprit for the fall in unemployment was a drop in the participation rate to 68.2% from 68.5%.NZD/USD jumped 30 pips on the headline but immediately gave back the gains and turned lower.

China January CPI rose 4.5% compared to the 4.0% expected. It was a large miss and suggests the PBOC will be in no rush to loosen policy any time soon, perhaps not even this year. The Australian dollar fell a half cent in the aftermath of the report but quickly regained its footing, underscoring the demand for AUD.

In Europe, Greek leaders are attempting to scale back Troika demands to cut pensions. A compromise would boost EUR and broader sentiment.

The major events of the session are the BOE decision at 1200 GMT and the ECB decision at 1245 GMT. The Bank of England is expected to boost its asset purchase plan by 50-75B pounds. The larger the amount, the more cable will decline. The ECB is expected to leave rates unchanged but there is a small chance of a rate cut, something that would cap recent euro gains.

Our first Premium EURUSD long hit all targets, while the 2nd one is 15 pips away from all targets. Full details can be seen here: We have a new set of Premium trades, including 2 on EURGBP. For direct access, click here:


Latest IMTs