Dollar, Yen Aim Higher As S&P 500 Futures Point To Risk Aversion

By Ilya Spivak, Currency Strategist

Talking Points

  • Dollar, Yen to Extend Gains as S&P 500 Futures Point to Risk Aversion
  • European Commission Forecasts May Compound Negative Sentiment
  • UK PPI Drop May Weigh on British Pound as Traders Rethink BOE Bets

The US Dollar and Japanese Yen advanced against their major counterparts overnight as Asian stocks declined, boosting demand for the go-to haven currencies. The MSCI Asia Pacific benchmark index fell close to 1 percent, with pressure from news that JPMorgan suffered a hefty $2 billion trading loss in synthetic credit securities that proved to be riskier than expected compounded by deeply disappointing Chinese industrial production figures . S&P 500 stock index futures are trading sharply lower, hinting more of the same is likely ahead amid continued risk aversion.

The economic calendar is relatively quiet in European hours. The final revision of April’s German CPI reading is expected to keep headline inflation at 2 percent, unchanged from initial estimates. Barring a significant deviation from expectations, traders are likely to look ahead to an updated set of economic growth projections from the European Commission after yesterday’s ECB monthly report painted a dour picture.

Professional forecasters polled by the central bank slashed their bets on economic growth but upgraded the outlook for inflation in 2012 and 2013, hinting at that the ECB will not be quick to offer stimulus even as slump deepens. If the Commission’s estimates strike a similar tone, the outcome may prove negative for overall risk appetite (and thereby for stocks-linked currencies ) considering the Eurozone recession presents the most significant headwind facing global output.

UK PPI figures are expected to show wholesale inflation slowed to 2.9 percent in April, the weakest since November 2009. The result may weigh a bit on the British Pound , hinting that easing price pressure in the pipeline will translate into lower headline consumer prices in the months ahead, giving the Bank of England room to reconsider additional easing after the economy entered into a technical recession in the second quarter. Policymakers shied away from topping up asset purchases yesterday, presumably on inflationary concerns.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

NZ Card Spending - Retail (MoM) (APR)

0.8%

0.5%

0.3%

22:45

NZD

NZ Card Spending (MoM) (APR)

0.6%

0.5%

-0.1% (R+)

22:45

NZD

Food Prices (MoM) (APR)

-0.1%

-1.0%

23:50

JPY

Japan Money Stock M2 (YoY) (APR)

2.6%

2.9%

3.0%

23:50

JPY

Japan Money Stock M3 (YoY) (APR)

2.3%

2.5%

2.6%

1:30

CNY

Consumer Price Index (YoY) (APR)

3.4%

3.4%

3.6%

1:30

CNY

Producer Price Index (YoY) (APR)

-0.7%

-0.5%

-0.3%

5:30

CNY

Industrial Production (YoY) (APR)

9.3%

12.1%

11.9%

5:30

CNY

Industrial Production YTD (YoY) (APR)

11.0%

11.7%

11.6%

5:30

CNY

Retail Sales YTD (YoY) (APR)

14.7%

14.9%

14.8%

5:30

CNY

Retail Sales (YoY) (APR)

14.1%

15.1%

15.2%

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (APR)

20.2%

20.4%

20.9%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German CPI (MoM) (APR F)

0.1%

0.1%

Medium

6:00

EUR

German CPI (YoY) (APR F)

2.0%

2.0%

Medium

6:00

EUR

German CPI - EU Harmonised (YoY) (APR F)

2.2%

2.2%

Medium

6:00

EUR

German CPI - EU Harmonised (MoM) (APR F)

0.2%

0.2%

Medium

8:30

GBP

PPI Input n.s.a. (YoY) (APR)

2.1%

5.8%

Low

8:30

GBP

PPI Input n.s.a. (MoM) (APR)

-0.9%

1.9%

Low

8:30

GBP

PPI Output n.s.a. (YoY) (APR)

2.9%

3.6%

Medium

8:30

GBP

PPI Output n.s.a. (MoM) (APR)

0.4%

0.6%

Medium

8:30

GBP

PPI Output Core n.s.a. (MoM) (APR)

0.2%

0.1%

Low

8:30

GBP

PPI Output Core n.s.a. (YoY) (APR)

1.9%

2.5%

Low

9:00

EUR

EC Releases Economic Growth Forecasts

-

-

High

9:00

EUR

Italy to Sell 92- and 364-day Bills

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2839

1.2968

GBPUSD

1.6050

1.6188

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/05/11/Dollar_Yen_Aim_Higher_as_SP_500_Futures_Point_to_Risk_Aversion.html