Intraday Market Thoughts

Negative Growth? No Problem. Onto Japan Data

by Adam Button
May 29, 2014 22:51

The market was nonchalant about a disappointing revision to Q1 US GDP. The antipodean trade broke out as AUD led the way and NZD lagged. Up next is a big day for Japanese data with CPI, employment and industrial production.

The Q1 GDP report was the worst since 2011 as the economy contracted 1.0%, worse than the 0.5% expected. You wouldn't know it from the market reaction as the S&P 500 rallied 0.5% to a fresh record and the US dollar hardly wavered.

Part of the reason is that an inventory drawdown and trade was the major drag and much of that will be reversed in the current quarter. Other data was also solid with initial jobless claims slipping to 300K compared to 318K expected.

The most notable market move was AUD/NZD as it broke above the Feb and April highs to the best levels this year. Outside of FX, the Treasury market showed signs of a turnaround; after falling to 2.40% the 10-year yield closed higher on the day at 2.46%.

Looking ahead, Fridays are typically slow in the Asia-Pacific region but not this one. It begins at 2330 GMT with Japanese April CPI which is expected at 3.4% y/y because of the consumption tax hike. Look for about 1.5% when that is stripped out.

At the same time the unemployment rate is expected to remain steady at 3.6%.

Twenty minutes later April industrial production is expected down 2.0% m/m in April.

There is also a sprinkling of lower tier data from Australia and New Zealand, Japanese housing starts and a speech from Fed hawk George.

The Premium Insight long in AUDNZD at 1.0700 is now up +200 pips, while both EURAUD shorts are yielding a total of 280 pips and remain in progress. We will issue new set of trades this evening before the release of Japanese CPI and unemployment data.
Act Exp Prev GMT
GDP Price Index (q/q) [P]
1.3% 1.3% 1.3% May 29 12:30
National CPI (APR) (y/y)
1.6% May 29 23:30
National CPI Ex Food, Energy (APR) (y/y)
0.7% May 29 23:30
National CPI Ex-Fresh Food (APR) (y/y)
3.1% 1.3% May 29 23:30
Tokyo CPI (APR) (y/y)
2.9% May 29 23:30
Tokyo CPI ex Food, Energy (APR) (y/y)
2% May 29 23:30
Tokyo CPI ex Fresh Food (APR) (y/y)
2.9% 2.7% May 29 23:30
Industrial Production (APR) (m/m) [P]
-2.0% 3.8% May 29 23:50
Industrial Production (APR) (y/y) [P]
7.4% May 29 23:50
Housing Starts (APR)
895M May 30 5:00
Housing Starts (APR) (y/y)
-8.4% -2.9% May 30 5:00
Fed's George Speech
May 30 1:30
Fed's Lacker speech
May 30 18:00
FOMC's Williams speech
May 30 21:00
Philadelphia Fed's Plosser speech
May 30 21:00
Continuing Jobless Claims
2,631K 2,650K 2,648K May 29 12:30
Initial Jobless Claims
300K 318K 327K May 29 12:30
Jobless Claims 4-Week Avg.
311.50K 322.75K May 29 12:30
Unemployment Rate (APR)
3.6% 3.6% May 29 23:30

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