Market Drivers April 09, 2013

USD/JPY fails on 1st run to 100.00 but support comes in at 99.00
UK IP/MP better helps lift cable to 1.5300
Europe 0.72% Nikkei -0.24%
Oil $93.72/bbl
Gold $1574/oz.

Europe and Asia:
AUD NAB Business Confidence 2 vs. 1
JPY Machine Tool Orders -21.6% vs. -21.5%
CHF Unemployment Rate 3.1%
CHF CPI 0.2% vs. 0.3%
CHF Retail Sales 2.4% vs. 2.9%
EUR German Trade Balance 17.1B vs. 16.2B
GBP Manufacturing Production 0.8% vs. 0.4%
GBP Visible Trade Balance -9.4% vs. 8.7%

North America:

None

It's been a relatively strong night for risk FX with cable retaking the 1.5300 level while Aussie exploded to barrel through 1.0450 in the wake of benign Chinese CPI data. USD/JPY however failed in its first attempt to take out the 100.00 level and the obligatory profit taking weighed in the EUR/USD as well taking the pair to test 1.3000 support as EUR/JPY declined.

By mid morning European dealing prices stabilized with USD/JPY finding support at 99.00 while EURUSD slow ground its way back towards 1.3050. With no major eco data on the docket most of the price action was driven by rhetoric. In Asia, comments by Japanese Finance minister Aso that " Excessive yen gain has been corrected" sent USD/JPY into a flutter as traders assumed that Japanese officials may have been trying to temper the rally, but Mr. Aso quickly changed to wording to "is correcting" suggesting that authorities in Japan are not yet fully satisfied with the exchange level.

Just to reinforce the notion Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe, said that a level of 98.00-100.00 for USD/JPY would be good for the economy. However, after failing to mount a run at 100.00 USD/JPY remained unmoved by Mr. Hamada's dovish rhetoric.

In UK, the better than expected Manufacturing Production data helped to push cable through the 1.5300 level after it printed at 0.8% vs. 0.4% eyed. This was the third upward surprise in the last four months of data and suggests that the manufacturing sector may be starting to recover. On the other hand Trade Data from UK was horrid as the deficit widened to -9.4B versus -8.7B projected, but the currency market shrugged off the news and focused on the better production numbers instead.

Lastly, as the dealing progressed in European session Aussie caught a bid and rose through the 1.0450 level after CPI data from China proved to be relatively benign allaying any fears that the PBOC will have to tighten monetary policy anytime soon. Generally, the current risk on environment appears to be supported by the belief that the two pronged growth offensive from Asia and North America will be able to offset the lingering recession in the Eurozone.

With no data on the calendar in US, trading will likely be driven by equity flows and any further comments from monetary officials. The EUR/USD remains relatively resilient and if it can break through the key 1.3050 level and close the gap from the month prior, the momentum could carry it through the 1.3100 figure as the day proceeds.