Fundamental Headlines - Biggest Banks May Need 17% Core Capital under EU Plan – Bloomberg - Consumer Prices in U.S. Increased at a Slower Pace in March – Bloomberg - Embarrassed by Rocket Crash, North Korea May Try Nuclear Test – Reuters - China’s Growth Slows to 8.1% – WSJ - China’s Stealth Stimulus – WSJ European Session Summary Wednesday’s and Thursday’s rally represented the best two-day rally by equity markets thus far in 2012. It’s of little coincidence that the US Dollar had one of its worst down days of the year, with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) sliding by the most since February 23. Typically this type of price action is characteristic of exuberant optimism, be it on emerging market growth, near-term relief in the Euro-zone sovereign debt saga, or further progress made by the US economy. In line with these market themes, the mid-week rally took cues from all three sources: Chinese loan growth signaled the potential for a 9.0 percent first quarter growth reading; European Central Bank policymakers were openly discussing utilizing the securities market program (SMP) to purchase Spanish debt; and Federal Open Market Committee voting member Janet Yellen made the argument for low-rates through 2016. Today’s price action is indicative of a breakdown in these “rumors,” which have thus far proven to be nothing more than hot air. The Chinese GDP print for the first quarter underpins the majority of the bearish sentiment present in the market today. The 8.1 percent reading now only disappoints the “whisper” print of 9.0 percent, but it also falls under the consensus forecast of 8.3 percent. As expected, the Australian Dollar fell sharply on the release, losing 40-pips to the Japanese Yen and another 50-pips to the US Dollar. The China print coupled with rising Euro-zone periphery bond yields fostered the necessary environment to see the US Dollar retake all of its losses the past two-days. Taking a look at credit, the German 10-year Bund was the top performer as its yield shed 5.4-basis points to drop to 1.732 percent. The PIIGS were substantially weaker on the whole, with the Italian and Spanish 10-year bonds’ yields rising to 5.499 percent and 5.942 percent, respectively. EURUSD 5-min Chart: April 13, 2012 Charts Created using Marketscope – Prepared by Christopher Vecchio Overall, the New Zealand Dollar was the best performing major currency, gaining 0.14 percent against the US Dollar. The Canadian Dollar was the only other currency outperforming the US Dollar, up 0.03 percent. The Euro, the day’s worst performer, was down by 0.42 percent ahead of the US cash equity session. 24-Hour Price Action Key Levels: 14:00 GMT Thus far, on Friday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading higher, at 9937.86 at the time this report was written, after opening at 9912.41. The index has traded mostly higher, with the high at 9945.12 and the low at 9908.55. --- Written by Christopher Vecchio, Currency Analyst To contact Christopher Vecchio, e-mail firstname.lastname@example.org Follow him on Twitter at @CVecchioFX To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to email@example.com
updated Apr 13, 2012
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