FOREX: Dollar Poised to Rise on Risk Aversion, Swiss CPI on Tap

The US Dollar may rise on safety demand as stock index futures point toward risk aversion. Swiss inflation figures headline the economic calendar in Europe.

Overnight Headlines

• NZ Dollar Slumps as IM Says Currency More than 20% Overvalued
• UK Retail Sales Rise Most in Five Years, Seasonal Factors Likely at Work
• China's Trade Surplus Tops Expectations as Import Growth Slows

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.4264	1.4452
GBPUSD	1.6312	1.6449

The Euro declined in overnight trade, with prices retracing about half of the rebound noted in NY hours to probe near 1.43 to the US Dollar. The British Pound was little changed, oscillating in a narrow range around 1.64 to the greenback. We are looking for attractive EURUSD and GBPUSD selling opportunities in the days ahead.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	NZ Card Spending - Retail (MoM) (APR)	1.5%	-	1.6% (R+)
22:45	NZD	NZ Card Spending (MoM) (APR)	1.7%	-	0.5%
23:01	GBP	BRC Sales Like-For-Like (YoY) (APR)	5.2%	2.5%	-3.5%
23:01	GBP	RICS House Price Balance (APR)	-21%	-23%	-23%
0:00	NZD	QV House Prices (YoY) (APR)	-1.9%	-	-2.0%
1:30	AUD	Trade Balance (A$) (MAR)	1740M	500M	-87M (R+)
2:00	CNY	Trade Balance (USD) (APR)	$11.42B	$3.2B	$0.14B
2:00	CNY	Exports (YoY) (APR)	29.9%	29.5%	35.8%
2:00	CNY	Imports (YoY) (APR)	21.8%	28.9%	27.3%

The New Zealand Dollar underperformed in overnight trade, down against all of its top counterparts after the International Monetary Fund said the currency was overvalued by 20 percent or more. The Kiwi fell as much as 0.6 percent on average against the majors.

UK Retail Sales rose 5.2 percent in the year through April according to a report from the British Retail Consortium, marking the largest increase in five years. BRC Director General Stephen Robertson dismissed the seemingly positive result however, chalking it up with a particularly weak April 2010 outcome. Indeed, that print was marred by uncertainty ahead of last year's UK general election and didn't include Easter holiday spending, as this year's numbers did.

China's Trade Balance widened to a whopping $11.4 billion, topping expectations by nearly four-fold, as import growth slowed to an annual pace of 21.8 percent. While the result suggests that recent monetary tightening measures are having an impact in slowing domestic demand, policymakers have been clear that further rate hikes are on tap, making this release largely a non-event.

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
5:45	CHF	SECO Consumer Confidence (APR)	10	10	Medium
6:45	EUR	French Manufacturing Production (MoM) (MAR)	0.4%	0.7%	Low
6:45	EUR	French Industrial Production (MoM) (MAR)	0.4%	0.4%	Low
6:45	EUR	French Industrial Production (YoY) (MAR)	4.7%	5.6%	Low
6:45	EUR	French Manufacturing Production (YoY) (MAR)	5.9%	7.2%	Low
7:15	CHF	Consumer Price Index (MoM) (APR)	0.5%	0.6%	High
7:15	CHF	Consumer Price Index (YoY) (APR)	0.6%	1.0%	High
7:15	CHF	CPI - EU Harmonised (MoM) (APR)	-	0.7%	Medium
7:15	CHF	CPI - EU Harmonised (YoY) (APR)	-	1.0%	Medium
8:00	EUR	Italian Industrial Production w.d.a. (YoY) (MAR)	4.0%	2.3%	Low
8:00	EUR	Italian Industrial Production n.s.a. (YoY) (MAR)	3.0%	2.3%	Low
8:00	EUR	Italian Industrial Production s.a. (MoM) (MAR)	0.8%	1.4%	Low

Swiss economic data captures a rare moment in the spotlight on Tuesday, with all eyes pointed to April's Consumer Price Index reading after SNB said its “ready to take measures necessary to ensure stable prices” and contended that the current, ultra-loose monetary policy “carries long-term risks for prices” two weeks ago, giving the strongest indication yet that it was getting ready to unwind stimulus. With that in mind, the annual inflation rate is expected to print lower at 0.6 percent, suggesting measure of downward pressure on the Franc may emerge.

Turning to sentiment, stock index futures tracking the S&P 500 – a go-to benchmark for overall risk appetite – are tracking lower overnight, down 0.2 percent ahead of the opening bell in Europe. On balance, this points to a relatively risk-averse mood that is likely to benefit the safety-linked US Dollar at the expense of equities-linked currencies.

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