Intraday Market Thoughts

German ZEW Disappoints; US PPI is Next

by Patrik Urban
Oct 18, 2011 12:27

UK Consumer Inflation at three year high; German and Eurozone ZEW index disappoint. Market turns to PPI and TIC long term purchases. Premium Insights due before the US opening bell. Bernanke & King due to speak at 1:15 pm and 1:30 pm EST respectively.

USD remains bid in the ongoing session. As it has become the norm during times of broad risk aversion, the greenback is stronger across the board with the exception of JPY. All major equity indices are in the red.

In the UK, consumer inflation pushed up higher yet again. Annual CPI in September rose to 5.2% from 4.5% in August. Core CPI rose to 3.3% from 3.1%. Higher food, energy and transportation costs contributed to the increase. Given the deteriorating conditions of the economy it did not surprise that the strong CPI print failed to support GBP that which fell to 1.5695 against USD after the initial spike higher to 1.5785.

Today's disappointing European data intensified risk aversion that reappeared yesterday and pushed EURUSD as low as 1.3656. German ZEW economic sentiment survey continued its gradual nine months long decline to -48.3 from -43.3 in October, a level not seen since 11/2008. Current conditions component fell to 38.4 from 43.6.

Eurozone ZEW index fell to -51.2 from -44.6.

The New York session will bring September PPI at 8:30 am ET that is expected to tick up to 0.2% from 0% in August which translates to annual rise of 2.4% from previous 2.5%.

August net TIC long term purchases are due at 9:00 am and are expected higher at USD 27.8 bln from previous USD 9.5 bln. While the jump from 9.5 bln to nearly 28 bln may seem rather large, from a longer term perspective are capital inflows still below levels seen over the past few years.

Traders should also note speeches by Fed Chairman Bernanke at 1:15 pm and BOE Governor Mervyn King at 1:30 pm.


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