Intraday Market Thoughts

AUD Stronger After Retail Sales, NFP Forecasts Cut

by Adam Button
Jun 2, 2011 5:32

Ranges have been narrow so far in Asia-Pacific trading after Australian data on the trade balance and retail sales failed to spur significant moves. NZD and CHF are lagging while AUD and USD lead. Thursdays European session features the UK construction PMI.

Australias April trade surplus fell short of expectations at A$1.6B compared to the A$2.1B expected. The report was overshadowed by a 1.1% rise in retail sales compared to the +0.4% expected. Sales hit the highest in 17 months, lending credence to theories that the consumer will spur growth and generate inflation. The reports were released simultaneously and provided a strong initial lift to the AUD that faded as broader risk aversion took hold. AUD/JPY hit 86.60 following the report but pulled back to 85.97 as Asian stocks extended the selloff that started in the US.

Politics remain at the forefront in Japan as PM Kan faces in non-confidence vote today. He asked to be allowed to lead the nation until the Fukushima crisis stabilizes and said he will then step down. If the vote succeeds, Kan will be forced to resign or call an election within 10 days. The newsflow hurt JPY in early trading but it rebounded on risk aversion.

Looking back at Wednesdays session, we have to wonder what value an economist has to a forex trader. We cant help but shake our heads as economists scramble to knock down estimates for Fridays non-farm payrolls and Q2 GDP in the midst of a 120 pip fall in EUR/JPY and the worst percentage drop in stocks since August. The consensus is now around +100k after estimates were pulled down from +200k after ADP and ISM. For traders, however, the bulk of the risk averse trade is over and its time to position for an upside surprise or to look past NFP. This is why we offer real-time strategy and trading ideas here and on twitter for Premium subscribers.

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The lone data point on the European calendar is the UK construction PMI for May. It is expected to edge lower to 53.3 from a 53.5 prior. After Wednesday's disappointing UK manuf PMI and record low mortgage lending, the odds of a BoE rate hike have now fallen drastically. GBP has been especially sensitive to recent economic data as market participants wrestle with growth and inflation uncertainty. Another event is a 0915 GMT speech from Trichet as he accepts an award. We doubt anything will come from the speech, especially with the ECB meeting one week away on June 9.



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