How Long will this Bounce Last

The lack of bad news from Europe and the global economy was enough to spark a short-covering rally in risk assets to start the week. The commodity bloc led the way while the yen lagged. The Bank of Japan starts its two-day meeting and New Zealand releases inflation expectations data in the upcoming session. Mondays Premium Intermarket Insights trades include dual trades in AUDUSD, with long leg having been filled. We also have GBP trades ahead of Tuesdays UK CPI. More below.

It is difficult to pin Mondays risk rally on a single development. Several headlines contributed including: 1) Wens pro-Chinese growth comments 2) Hollande stirring up Eurobonds and 3) New Democracy making inroads in polls and forging an alliance with a the Democratic Alliance, a smaller pro-Europe party .

Still, the news wasnt all positive as the IIF said Spanish banks are undercapitalized and the Brazilian central bank said global growth has been disappointing.

Overall newsflow was quiet enough to spark a 1.6% relief rally in the S&P 500 after 7 days of losses. That sentiment spread to FX, leading to profit-taking and short-covering in commodity FX. An ominous sign came from the bond market, which hardly moved in response to the giddy mood in other risk assets.

The Asia-Pacific calendar is absent any scheduled events that could have a definitive impact on sentiment. At 0200 GMT, the Conference Board releases Chinese April leading indicators and at 0300, New Zealand releases its survey of inflation expectations. Neither is a market mover.

Nikkei News reported that tomorrows BOJ decision is unlikely to yield and change in outlook. Expectations for new, yen-weakening policies are minimal.

Mondays Premium Intermarket Insights trades include dual trades in AUDUSD, with long leg having been filled. We also have GBP trades ahead of Tuesdays UK CPI. Click here for direct access to these trades http://www.ashraflaidi.com/products/sub01/ access/?a=638 Nonsubscribers can get a free 1-week trial here: http://www.ashraflaidi.com/products/sub01/

-AB