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Inflation Data Dominates Economic Schedule
Fri, Jan 15 2010, 08:47 GMT
Asian equities are mixed today, and commodity markets are a little heavy, weighed by the previous session’s mediocre US data, and a correction of recent trends. Yesterday’s Eurozone Industrial Production came out at a much better than expected 1.0% MoM compared to estimates for 0.5% growth, and the poor reading from last month was also revised higher (from -0.6% to -0.3%). The encouraging data was, however, largely ignored with the more significant ECB rate meeting looming. As expected, the governing council kept interest rates unchanged at 1.00%, and in the later press conference President Trichet that the vote had been unanimous. He also repeated previous rhetoric that “current rates remain appropriate” and that both inflation pressures and inflation expectations are “firmly anchored”. Once the formalities were out of the way, much attention was focused on Greece’s budget deficit. Ever careful at selecting his responses, Trichet said suggestions of a country leaving the Euro-bloc were “absurd”, but warned that Greece could not expect “special treatment”. EURUSD traded lower in the hours following the press conference, but disappointments in the US data prevented an all-out EURUSD collapse. US Retail Sales dramatically missed forecasts by contracting -0.3% MoM against forecasts for a +0.5% expansion, although last month’s spectacular 1.3% MoM reading was revised even higher to 1.8%. US Business Inventories data was mildly better than predicted at 0.4% (vs. 0.3% expected).
Gold is consolidated between $1130-1150 yesterday, but struggled to overcome supply ahead of $1150 as USD weakness lingered. Major support at $1119 has held on two consecutive occasions so far, but a breach of that level would confirm a short-term head and shoulders pattern (forming since the middle of last week), and would target a revisit of $1080 levels.
Today’s economic calendar will be important for inflation readings, with both Eurozone and US CPI due. Eurozone CPI is expected to continue to tick higher by 0.3% MoM, 0.9% YoY (previous: 0.1% MoM, 0.5% YoY), and confirm that inflation is normalizing in line with ECB expectations. Thus far, Trichet and the ECB have had little cause to shift from their on-hold rate stance, so any shock increase in CPI would be considerably EUR-positive. US CPI is also expected to increase by 0.2% MoM, but the more significant data of the afternoon will probably be US Industrial Production which is forecast to come in at a strong 0.6% after last month’s 0.8% reading. Also due will be Empire Manufacturing and U.Mich Consumer Confidence.
R 2: 0.9405
R 1: 0.9325
CURRENT: 0.9265
S 1: 0.9170
S 2: 0.9125
R 2: 1.0422
R 1: 1.0415
CURRENT: 1.0265
S 1: 1.0230
S 2: 1.0207
R 2: 134.35
R 1: 133.30
CURRENT: 131.05
S 1: 130.60
S 2: 130.00
R 2: 12.849
R 1: 12.825
CURRENT: 12.715
S 1: 12.666
S 2: 12.575
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot