FOREX: Markets to Look Past German Jobs Report, Focus on US GDP

Currency markets are likely to look past German unemployment figures, with traders focused on the upcoming US Gross Domestic Product report.

Overnight Headlines

• Kiwi Dollar Underperforms as RBNZ Deflates Rate Hike Outlook
• Bank of Japan Keeps Policy Unchanged, Data Yields Mixed Results
• US Dollar Extends Losses as Fed Disappoints with Dovish Posture

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.4703	1.4952
GBPUSD	1.6521	1.6832

The Euro and the British Pound advanced in overnight trade, adding as much as 0.6 and 0.7 percent against the US Dollar, as the greenback came under broad-based selling pressure in the aftermath of the Federal Reserve monetary policy announcement (see below). We have entered long USDJPY.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
21:00	NZD	Reserve Bank of New Zealand Rate Decision	2.50%	2.50%	2.50%
23:01	GBP	GfK Consumer Confidence Survey (APR)	-31	-27	-28
23:15	JPY	Markit/JMMA Manufacturing PMI (APR)	45.7	-	46.4
23:30	JPY	National Consumer Price Index (YoY) (MAR)	0.0%	0.0%	0.0%
23:30	JPY	National CPI Ex Food, Energy (MAR)	-0.7%	-0.6%	-0.6%
23:30	JPY	National CPI Ex-Fresh Food (YoY) (MAR)	-0.1%	-0.1%	-0.3%
23:30	JPY	Tokyo Consumer Price Index (YoY) (APR)	-0.1%	0.0%	-0.2%(R+)
23:30	JPY	Tokyo CPI Ex Food (APR)	0.0%	0.1%	-0.3%
23:30	JPY	Tokyo CPI Ex-Fresh Food (YoY) (APR)	0.2%	0.2%	-0.3%
23:30	JPY	Job-To-Applicant Ratio (MAR)	0.63	0.60	0.62
23:30	JPY	Jobless Rate (MAR)	4.6%	4.8%	4.6%
23:30	JPY	Household Spending (YoY) (MAR)	-8.5%	-7.0%	-0.2%
23:50	JPY	Industrial Production (MoM) (MAR)	-15.3%	-10.6%	1.8%
23:50	JPY	Industrial Production (YoY) (MAR)	-12.9%	-8.5%	2.9%
3:00	NZD	Money Supply M3 (YoY) (MAR)		-	5.2%
4:00	JPY	Vehicle Production (YoY) (MAR)	-57.3%	-	-5.5%
4:31	JPY	Bank of Japan Interest Rate Decision	0.10%	0.10%	0.10%
5:00	JPY	Housing Starts (YoY) (MAR)	-2.4%	-1.1%	10.1%
5:00	JPY	Annualized Housing Starts (MAR)	0.807M	0.814M	0.872M
5:00	JPY	Construction Orders (YoY) (MAR)	-11.0%	-	19.5%

The US Dollar slumped in overnight trade, down as much as 0.5 percent on average against its top counterparts, after the Federal Reserve offered the bare minimum of hawkish commentary at its monthly policy meeting, confirming that QE2 will end as scheduled in June but maintaining that benchmark rate will remain low for an “extended period”. The US central bank also slashed the forecast for 2011 economic growth amid expectations of weak first-quarter performance ahead of today's GDP report. The New Zealand Dollar stood alone as the only currency to trade lower against its US namesake after the Reserve Bank of New Zealand kept interest rates at 2.5 percent and scuttled any hope for near-term increases, saying the current level was “likely to remain appropriate for some time [amid] continued economic disruption stemming from the [Christchurch] earthquakes.”

The Bank of Japan kept monetary policy unchanged, holding interest rates at 0.10 percent and keeping the size of its credit-loan program (¥30 trillion), asset-purchase fund (¥10 trillion) and monthly government bond purchases (¥1.8 trillion) at established levels. The remainder of the data set on offer from the island nation proved to be a mixed bag. Labor markets continued to improve, with the Jobless Rate holding at a 24-month low of 4.6 percent while the ratio of available jobs to seeking applicants unexpectedly rose to 0.63, the highest since January 2009. Meanwhile, Industrial Production fell short of economists' forecasts, down 15.3 percent in March in the aftermath of the Tohoku earthquake, while the Markit/JMMA PMI gauge showed manufacturing-sector growth slowed to the weakest in two years. Finally, Consumer Price Index figures printed flat as expected.

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	EUR	German Import Price Index (MoM) (MAR)	11.3%	11.9%	Low
6:00	EUR	German Import Price Index (MoM) (MAR)	1.1%	1.1%	Low
6:45	EUR	French Consumer Spending (MoM) (MAR)	0.2%	0.9%	Low
6:45	EUR	French Consumer Spending (YoY) (MAR)	3.7%	5.5%	Low
7:55	EUR	German Unemployment Change (APR)	-37K	-55K	High
7:55	EUR	German Unemployment Rate s.a. (APR)	7.0%	7.1%	Medium
8:00	EUR	Italian Business Confidence (APR)	103.5	103.8	Low

Germany's Unemployment figures headline the economic calendar. Expectations call for another decline, with the economy adding 37,000 jobs in April while the Unemployment Rate drops to just 7 percent, the lowest in at least two decades. On balance, the release seems unlikely to spark significant fireworks considering the healthy labor market in the Euro Zone's top economy has been a standby reality for months, offering nothing that hasn't already made its way into exchange rates.

Turning to sentiment, stock index futures tracking key European and US exchanges are firmly higher in late Asian trade, hinting risk-sensitive currencies will remain well-supported and pointing toward continued weakness for the US Dollar. The preliminary set of first-quarter US Gross Domestic Product figures will come into focus in the second half of the session, with consensus forecasts showing the world's largest economy added just 2 percent after growing 3.1 percent in the three months through December. Perversely, a worse-than-forecast print may actually underpin risky assets in the current environment, reinforcing the likelihood of a Fed that is slow to remove stimulus over the months ahead.

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