Intraday Market Thoughts

Bank of Japan, German PPI, US dollar weakness and Canada inflation

by Ashraf Laidi
May 20, 2011 7:39

The Bank of Japan left interest rates unchanged and didnt announce further measures to help the Japanese economy to recover from the after effects of the devastating earthquake and tsunami, preferring instead to wait and see the effects of the existing stimulus before acting further.

The yen has weakened over the past couple of days but has, as yet been unable to break and close above the 55 day MA at 82.01.

German April PPI is expected to increase slightly on a monthly basis to 0.6%, and slip back to 6% on an annualised basis. But even allowing for that it seems unlikely that any slight softness in price pressures will dissuade expectations of a further rate hike in July.

ECB member Yves Mersch is scheduled to speak on the European economy and is unlikely to talk down the prospects of impending rate hikes in the near term.

As such the single currency seems able to shrug off any concerns about sovereign debt problems and remains underpinned on rate hike expectations alone. Putting Greek worries aside, euros current strength is not that surprising given yesterday's poor US data, and its negative effect on the greenback.

The Philadelphia Fed business index for May came in at 3.9, the lowest level since October 2010 and well below expectations of 20.With existing home sales for April also declining 0.8% against an expectation of a 2% rise, market expectations remain of the view that US monetary policy is likely to remain loose even after QE2 has finished.

Also on the other side of the Atlantic Canada inflation data for April is expected to be the main focus with expectations that the recent strength of the Canadian dollar could well take the edge of inflation with expectations of a decline on a monthly basis to 0.5% from Marchs 1.1%.

For more in depth trading ideas in EURUSD, CADJPY (especially ahead of Caanda CPI), silver and oil, see our latest Premium section -

By KM - Staff


Latest IMTs