21.01.2011 - XTB market snapshot

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Date: 2011-01-21 09:23

USDJPY – the data helped the dollar / Equity markets  – data, earnings didn’t help much / Events to watch – BoA, Ifo, UK’s retail sales.

USDJPY – the data helped the dollar

The weekly initial claims in the US retraced back to around 400k last week (precisely 404k), suggesting that a worrying jump in a previous week (441k after a correction) was merely a one-off divergence from otherwise a downward trend, confirming a steady (even if not a rapid) improvement on the US labor market. Moreover, somewhat surprisingly, the US used home sales jumped to 5,28 mln annualized, well exceeding a consensus of 4,86 mln. However, the US residential market is far from booming – this week the report showed the lowest housing starts on record.

Stronger data translated into higher US yields – from 5 bps for 2 year bonds to 10-11 bps for 10Y and FRA18x24. That in turn supported the dollar. The USDJPY, sliding down for the last two weeks, jumped back to 83,10 in a move which might have started a wave 3 on the daily interval. However, a confirmation of such move would come only with a test of 83,50. So far, the pair once again proved a strong sensitivity to the US labor market data.   

Equity markets  – data, earnings didn’t help much

The macroeconomic data from the US and another piece of solid results from the tech companies: Google (reporting EPS at 8,75 USD, beating a consensus of 8,06 USD) and AMD (EPS 14c vs 11c expected) didn’t help equity markets yesterday, or perhaps helped to avoid a downward spiral. The S&P500 futures managed to defend a support trend line (with a hammer on H4), yet it didn’t translate into a rebound. Thus, perspectives for equities remain mixed. While the Chinese CPI didn’t scare investors, an extremely low put/call ratio for US equities suggest that something might be in the air.   

Events to watch – BoA, Ifo, UK’s retail sales

With no US data scheduled for today, investors are left to earnings. The key reports come from Bank of America (8.00 ET, 14.00 CET, consensus 14c) and GE (consensus 32c). In Europe, investors await the German Ifo (4.00 ET, 10.00 CET, consensus 109,9 pts.) and retail sales data in UK (4.30, 10.30, consensus -0,3% m/m). The UK’s data might have a noticeable impact on the GBP in light of a recent spike in inflation which ignited some speculation about BoE acting on rates sooner rather than later.  

Przemysław Kwiecień PhD, Chief Economist

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