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Risk Appetite Continues to Start Week
“Risk-on” trades extended the rally seen throughout last week with the Euro rallying above an important level of resistance at 1.2150. The Euro was boosted by stronger-than-expected industrial production data for the month of April in which output rose 0.8% on the month and climbed 9.5% compared to the same month last year. Forecasts were for a 0.5% m/m and 8.7% y/y increases. The annual rise was the best year-on-year increase since records began in January 1990.
From a look at the internals of the data we see that the gains were powered primarily by intermediate goods and a rise in capital goods. Energy output was down 0.9%. In a negative consumer goods (both durable and non-durable) were down. Still the fact that companies continue to invest in capital goods means they feel confident enough in the recovery to continue buying machinery.
What the data implies is that the worries around sovereign debt in the Euro-zone have so far not derailed the bloc’s recovery. That news is a welcome sign for the whole global economy and on the back of the better-than-expected release other currencies tied to global growth, like the Australian, New Zealand and Canadian Dollars, all rallied. The Pound got in the action as well with the GBP/USD regaining its losses from Friday on the back of its disappointing production data.
Equities rallied strongly in Asian markets and that carried over into the European session. Last week, the Dow industrial index closed 2.8% higher, and with a lack of negative news from the Euro-zone banking sector, markets shrugged off a weak US retail sales report to extend the rally in risk into this week.
Published on Mon, Jun 14 2010, 22:33 GMT