Market Drivers for April 2 2014

Euro GDP misses and PPI lower

UK PMI Construction slightly weaker

Nikkei 1.04% Europe 0.05%

Oil $99/bbl

Gold $1283/oz.

Europe and Asia:

AUD Building Approvals -5.0% vs. -1.7%

GBP UK Nationwide 0.4% vs. 0.7%

GBP UK PMI Construction 62.5 vs. 63.1

EUR Final GDP 0.2% vs. 0.3%

EUR Final PPI -0.2% vs. -0.1%

North America:


USD Factory Orders 10:00 AM

Most of the G-10 currencies continued to tread water in lackluster Asian and early European trade as markets prepared for a very busy economic calendar at the second half of this week. The one exception was the USD/JPY pair which managed to push higher on the back of 1% gains in the Nikkei, but failed to take out the key 104.00 barrier.

USD/JPY now finds itself at a key juncture as the recent rally has finally broken the low volatility conditions that existed for most of March. However, the next phase of the rally will depend on the slew of US data that will hit market starting today. At 12:25 GMT, the market will get a look at the ADP numbers with consensus view looking for a substantial jump to 192K from 139K the month prior.

If the ADP data meets or beats the forecast, USD/JPY could quickly erase the 104.00 barrier and put itself in position to challenge the yearly highs near the 105.00 figure. Investor sentiment has clearly turned positive on the US economy and monetary policy and the pair is also being aided by speculation that the BOJ will increase its QE efforts to offset the negative impact of the newly enacted sales tax. However, if the data this week is not supportive, the pair could quickly retreat to its base near the 102.00 level and once again resume its tight range trade.

Meanwhile in Europe the broad macro data remained unimpressive as the final GDP figures were revised downward to 0.2% from 0.3% initially eyed and the PPI reading sunk further into deflationary territory registering at -0.2% versus -0.1% projected. Price levels declined despite the rise in energy costs which is likely to make ECB argument of “temporary” declines much harder to make.

Still the central bank remains reluctant to act at this time and rumors emanating from this month’s meeting suggest that the debate is heated on the issue of further easing. The deflationary readings from the region are somewhat offset by the better economic activity in the periphery and the ECB may prefer to wait a bit longer to see if the economy in the region will recover organically without any additional policy stimulus.

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