Risk aversion was back in vogue in the London session as1Q corporate earnings expectations return to the fore. The IMF revised its estimates for US bad bank debt and a prominent investor called the latest run up in stocks a bear market rally something we have been harping on for some time. This coupled with the hangover from the news yesterday that the Treasury will extend the PPIP deadline (suggesting little interest from the private sector for toxic bank debt) dampens the confidence that supported the rally in risk over the last few weeks. It now seems plausible that the PPIP will not work as well as hoped and that bank earnings will continue to disappoint. Reality bites.

Economic data across the pond continued to print on the weak side as well. The big news was a downward revision to eurozone 4Q GDP which is now seen falling at a -1.5% annual rate from a previously reported -1.3% decline – the weakest since data began in 1995. EUR/USD came under pressure and sank nearly -150 pips in the session towards 1.3230/40. The 1.3330 level proved to be crucial support and a second try through there elicited a sharp decline. The pair remains heavy in an hourly down-channel here with immediate support by 1.3220 while a topside hurdle lurks near 1.3280.

UK data was actually a touch better with February industrial production falling -1.0% after a -2.7% drop the prior month. EUR/GBP shed about -50 pips towards 0.9040/50 on the follow.
Cable could not stay up despite the better economic news and it slipped -85 pips into the 1.4630/40 zone. The USD strength on the back of the flight to safety outweighed any positive GBP/USD impact from better data.

The yen crosses were also sold. EUR/JPY plunged almost -200 points towards 132.40/50 after the 134.80 hourly up-channel support finally gave way. The decline in USD/JPY was a less pronounced -35 pips into 100.10/00. The 99.80 level looks like important short term support here with an hourly up-trendline and hourly down-trendline converging near this level.

Upcoming Economic Data Releases (NY Session) prior expected

  • 4/7 14:00 GMT US IBD/TIPP Economic Optimism APR 45.3 46.5

  • 4/7 19:00 GMT US Consumer Credit FEB $1.8B -$3.0B

  • 4/7 21:00 GMT US ABC Consumer Confidence 5-Apr -49 -49