Intraday Market Thoughts

No Love Reaction to US Data Surprises, RBI Only BRIC Standing

by Adam Button
Dec 16, 2011 1:08

The best report on US jobless claims in three years failed to inspire a positive reaction in markets. CHF and CAD were top performers; USD and AUD lag. Indias central bank delivers a rate decision late in Asia-Pacific trading, widely expected to keep rates unchanged. More importantly, its the ONLY BRICs nation to have yet to cut interest rates. Although the PBOC has not cut its policy lending rates, it has already slashed the reserve requirement ratio. Another look at those Premium Intermarket Insights, with those AUDNZD trades, moving further near the target.

Initial jobless claims fell to 366K compared to the 389K expected the lowest reading since May 2008. At the same time, the Empire Fed climbed to 9.53 from 0.61. The euro hit 1.3050 shortly after the reports but that was the high of the day. Other risk trades followed a similar pattern, tailing off as the day continued.

Other economic data was mixed as industrial production fell 0.2% compared to the +0.2% expected and the Philly Fed hit 10.3 compared to the 5.0 consensus.

Volatility was light and most pairs traded in a 50 pip range in the US session. The S&P 500 gained 0.3% to 1216.

We would have anticipated a better market reaction given the news, especially coming on the heels of the strong Spanish debt auction. Instead, markets were unimpressed even after several days of caution.

The takeaway is that good news has failed to prompt a substantial short squeeze in EUR or other beaten down assets. The market caution was well founded as Fitch cut the ratings of six of the worlds top banks after the close. For a look at those EURJPY, Aussie & metals trades, they can be accessed directly at

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Commodity markets also continue to send negative signals. WTI crude fell another $1 after sinking nearly $5 on Wed and gold fell for a fourth day.

The RESERVE BANK OF INDA will announce rates at 0630 GMT. The current repo rate is at 8.50% after 13 rate hikes. A fall in the rupee may keep pressure on inflation, which stands above 9%. The government and central bank have indicated a coming shift toward growth-oriented policies but it may take some time. In Friday's decision we will get a sense of how long they plan to wait. The


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