Intraday Market Thoughts

King Kicks Cable, Aussie CPI Next

by Adam Button
Jan 23, 2013 0:09

Volatility scaled back in US trading but comments from the BOE Governor caused a quick fall in cable. The yen didn't extend post-BOJ gains in US trading but it remained the top performer on the day; the US dollar lagged. Australian CPI is the major event risk in Asia-Pacific trading.

The market continued to digest the BOJ easing but the most-common reaction was disappointment. US traders forced USD/JPY to 89.00 but the rebound was quickly wiped out and the pair wrapped out the day near the lows.

The highlight of the day was a speech from King, who said more stimulus is ready if needed and talked about rewriting the BOE mandate. Cable quickly fell a half-cent to 1.5820.

The reaction may be overdone. A closer look at his comments showed that he hedged the dovishness. More importantly, it will be incoming governor Carney who determines what happens next.

US economic data was soft. The Richmond Fed fell to -12, the lowest since July and much worse than the +5 consensus. Existing home sales were also weak at 4.94m compared to 5.10m expected.

The Canadian dollar was more active than usual ahead of the Bank of Canada decision on Wednesday. Retail sales numbers were slightly soft but USD/CAD was unable to rise above 0.9950 and has slipped back down to 0.9918. Look for the BOC to downgrade its growth forecast for 2013.

The focus now shifts to the Australian dollar with fourth quarter CPI numbers on deck. At, 0030 GMT, headline inflation and the all-important trimmed mean are both expected to accelerate to 2.4% y/y. A higher reading could cut into expectations of a rate cut at the Feb 6 RBA meeting. Current market pricing suggests a 34% chance of a cut. If that evaporates, AUD will likely rise above 1.06.

Act Exp Prev GMT
Consumer Price Index (Q4) (q/q)
0.4% 1.4% Jan 23 0:30
RBA trimmed mean CPI (Q4) (q/q)
0.7% 0.7% Jan 23 0:30
Consumer Price Index (Q4) (y/y)
2.4% 2.0% Jan 23 0:30
RBA trimmed mean CPI (Q4) (y/y)
2.4% 2.4% Jan 23 0:30
Existing Home Sales Change (DEC) (m/m)
-1.0% 1.2% 4.8% Jan 22 15:00
Existing Home Sales (DEC) (m/m)
4.94M 5.10M 4.99M Jan 22 15:00
Retail Sales ex Autos (NOV) (m/m)
-0.3% 0.1% 0.2% Jan 22 13:30
Retail Sales (NOV) (m/m)
0.2% 0.0% 0.5% Jan 22 13:30
Richmond Fed Manufacturing Index (JAN)
-12 4 5 Jan 22 15:00

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