Market Drivers Jan 13, 2015

Chinese Trade Data better fuels risk on rally
EU IP weaker
Nikkei 2.88% Eurostoxx 1.53%
Oil $31/bbl
Gold $1080/oz

Europe and Asia:
CNY TD 60B vs. 53B
EUR IP 1.1% vs. 1.3%

North America:
No Data

Risk currencies got a short term boost in Asian session trade today after Chinese trade data surprised to the upside and the yuan fix remained steady for the fourth day in a row.

Chinese trade surplus came in at 60B versus 53B eyed with exports declining only -1.4% versus -8.0% forecast. Imports were also better declining by -7.6% versus -11.5% drop anticipated by analysts. Overall the data showed some stabilization in both production and demand and spurred a much needed rally in commodity currencies after several days of relentless selling.

The pop however, was limited at best with most of the enthusiasm waning by morning European dealing as Aussie backed off its highs at 7049 to trade back to 7025 while USDCAD rose above the 1.4200 again as oil began to slip towards $31/bbl handle.

Market participants remain very wary of risk and although Chinese data was a trifecta of positive surprises the overall trend in the numbers still points to contraction in demand. With no other data on the global docket today, it may be a session of consolidation in risk FX as bulls lick their wounds over the damage inflicted since the start of the year.

For now comm dollars appear to have found a modicum of support with Aussie bouncing off the .6950 level while USD/CAD was capped at 1.4300, but much of the direction for rest of the day is likely to be driven by price of oil. Yesterday crude broke the $30/bbl level and then instantly popped as stops were run. Today the market will get a look at the crude inventory data and if the release shows a another massive build oil could easily drop through $30/bbl once again and take the commodity dollars down with it.

The commodity is in a freefall and is now driven as much by sentiment as any fundamental factors and therefore is likely to inject volatility not only in its own market but into risk FX as well as the correlation between commodity prices and commodity currencies remains tight.

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