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USD: Today’s data releases not generally market movers.   The consumer confidence numbers can move the dollar, but generally only if more than 5 big figures away from the market expectation, which for today’s number stands at 70.5 (from 68.1 previously).

JPY: Retail sales will be released in Japan overnight. Of course, the policies being undertaken by the authorities in Japan are designed to return the Japanese economy to one generating inflation, but retail sales will be closely watched for signs that confidence is improving and that households are not holding back on larger purchases in the hope that prices will be lower in the future. Market looks for a small 0.2% rise after 1.5% fall in March.

Idea of the Day

A lot of things have changed in FX markets in recent weeks, including the change in fortunes for the single currency compared with sentiment in peripheral markets.

It used to be the case that the change in yields in Spain and Italy was a dominant factor for the euro direction (a higher premium over German yields leading to a weaker euro), but that has changed dramatically. The 1-month correlation between the single currency and a measure of peripheral yields (weighting them by GDP shares) has moved into positive territory (1-month rolling basis).

This has happened only very briefly in recent years and the current reading (0.20) is the highest seen since the middle of 2009 (i.e. before the sovereign crisis kicked off).   For now, the message is that EURUSD is trading off other factors besides the Eurozone crisis. It may be a case of the calm before the storm, but it’s a point worth bearing in mind.

Latest FX News

JPY:  One of the weaker performers overnight in a generally firmer dollar environment. Nikkei also managing to claw back some of last week’s losses, up by more than 1% so far.   BoJ member Miyao stated (or reminded) that increase of monetary base helps weaken the currency.   USDJPY just below 102.00 in early Europe trade, trendline support coming in a 101.00

AUD: Showing some signs of stabilisation after the sharp sell-off seen through most of the month to date.   Last year’s low of 0.9582 has not been breached so far, with daily charts continuing to look over-sold for AUDUSD.

EUR: The single currency continues to detach itself from developments in peripheral markets. The strong inverse correlation between EURUSD and spreads in peripheral countries (1-month rolling basis) has turned positive over the past week.