FOREX: US Earnings, Inflation Data Key Ahead with Quiet Trade Likely in Europe

The US corporate earnings calendar and a batch of inflation data will take center stage following quiet trade in Europe with London closed through the week-end.

Overnight Headlines

• Aussie, Kiwi Dollars Follow Stocks Lower after US GDP Report
• New Zealand Exports Hit Record High on AUD/NZD Strength
• Pound Gains on Pre-Weekend Flows Ahead of Market Closure

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.4777	1.4877
GBPUSD	1.6609	1.6713

The Euro traded sideways in overnight trade, oscillating in a narrow range below 1.4850 to the US Dollar. The British Pound narrowly outperformed, adding 0.2 percent against the greenback and edging higher against most of the majors. The move likely came on the back of position-squaring ahead of the weekend with UK markets closed today for the Royal Wedding. We see EURUSD heading to 1.50 over the days ahead while the GBPUSD is at risk of a pullback. We are also still long USDJPY.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Trade Balance (NZ$) (MAR)	464M	200M	193M (R-)
22:45	NZD	Trade Balance (YTD) (NZ$) (MAR)	631M	375M	755M (R-)
22:45	NZD	Exports (NZ$) (MAR)	4.53B	4.20B	3.87B
22:45	NZD	Imports (NZ$) (MAR)	4.07B	3.90B	3.67B (R-)
0:30	AUD	RP Data-Rismark House Px N (MoM) (MAR)	0.0%	-	0.0%
0:30	AUD	RP Data-Rismark House Px S (MoM) (MAR)	0.2%	-	0.7%
1:30	AUD	Private Sector Credit (YoY) (MAR)	3.6%	3.3%	3.4%
1:30	AUD	Private Sector Credit (MoM) (MAR)	0.6%	0.4%	0.6% (R+)
1:35	CNY	MNI Business Condition Survey (APR)	69.28	-	69.33
2:30	CNY	HSBC Manufacturing PMI (APR)	51.8	-	51.8
3:00	NZD	Money Supply M3 (YoY) (MAR)	5.6%	-	5.2%

The Australian and New Zealand Dollars underperformed, down against all of their major counterparts as stocks sold off in Asian trade, weighing on the risk-sensitive currencies. The MSCI Asia Pacific regional benchmark equity index fell 0.6 percent after a disappointing set of US Gross Domestic Product figures weighed on the outlook for the region's exporters, which count on the world's top consumer market for a hefty percentage of their overseas demand.

New Zealand's Trade Balance widened markedly more than economists expected, printing at NZ$464 million in March versus NZ$193 million in the previous month. Consensus forecasts called for a print at NZ$200 million. Exports soared to a record-high NZ$4.53 billion as the Kiwi Dollar hit the lowest since June 1992 against its Australian counterpart, making the smaller antipodean country's exports the most attractive for its top trading partner in nearly two decades.

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	EUR	Germany Retail Sales (MoM) (MAR)	0.2%	-0.4%	Medium
6:00	EUR	Germany Retail Sales (YoY) (MAR)	1.4%	1.1%	Medium
6:45	EUR	French Producer Prices (MoM) (MAR)	0.7%	0.8%	Low
6:45	EUR	French Producer Prices (YoY) (MAR)	6.4%	6.3%	Low
8:00	EUR	Italian Unemployment Rate (SA) (MAR)	8.4%	8.4%	Low
8:00	EUR	Euro-Zone M3 s.a. (3M) (MAR)	1.9%	1.7%	Low
8:00	EUR	Euro-Zone M3 s.a. (YoY) (MAR)	2.2%	2.0%	Low
9:00	EUR	Euro-Zone Consumer Price Index Est. (YoY) (APR)	2.7%	2.6%	Medium
9:00	EUR	Euro-Zone Business Climate Indicator (APR)	1.4	1.41	Low
9:00	EUR	Euro-Zone Consumer Confidence (APR F)	-11.4	-11.4	Low
9:00	EUR	Euro-Zone Economic Confidence (APR)	107	107.3	Low
9:00	EUR	Euro-Zone Industrial Confidence (APR)	6.6	6.6	Low
9:00	EUR	Euro-Zone Services Confidence (APR)	10.5	10.8	Low
9:00	EUR	Euro-Zone Unemployment Rate (MAR)	9.9%	9.9%	Medium
9:00	EUR	Italian CPI (NIC incl. tobacco) (MoM) (APR)	0.3%	0.4%	Low
9:00	EUR	Italian CPI (NIC incl. tobacco) (YoY) (APR)	2.4%	2.5%	Low
9:00	EUR	Italian CPI - EU Harmonized (MoM) (APR)	0.7%	2.2%	Low
9:00	EUR	Italian CPI - EU Harmonized (YoY) (APR)	2.6%	2.8%	Low
9:30	CHF	KOF Swiss Leading Indicator (APR)	2.20	2.24	Medium
10:00	EUR	Italian Producer Price Index (YoY) (MAR)	-	5.7%	Low
10:00	EUR	Italian Producer Price Index (MoM) (MAR)	-	0.6%	Low

A quiet session is likely ahead with London markets – the world's top foreign exchange trading center – is closed for the Royal Wedding celebration. Preliminary Euro Zone Consumer Price Index figures headline the calendar, with expectations calling for the inflation rate to hit a 30-month high at 2.7 percent in April. The outcome may help to underpin European Central Bank rate hike expectations, arresting the precipitous drop recorded over the past 3 weeks and driving the Euro higher. Indeed, a Credit Suisse gauge tracking traders' priced-in tightening outlook for the coming 12 months has dropped to the lowest in three months at 75bps having topped out on April 11 at 140bps.

Turning to sentiment, stock index futures are trading slightly lower to hint that risky assets may be due for a bit of profit-taking into the week-end, offering the safety-linked US Dollar a bit of a lifeline against the major currencies. The US earnings calendar will come into focus later in the session, with nineteen S&P 500 companies including Caterpillar, Chevron, Goodyear and Merck set to report first-quarter results. US inflation indicators may also prove significant in the aftermath of the FOMC rate decision and GDP release earlier in the week, with soft PCE Deflator and Employment Cost Index readings reinforcing expectations of a Fed that is in no hurry to unwind stimulus and keeping a floor under share prices.

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