The spread of Swine Flu has added a new component into market activity this week.
While it is far too early to conclude that this will develop into a pandemic, the WHO has warned that this is a global concern. Stock markets in Asia took a hit on the news, oil is weaker both on the fear that this could stifle economic recovery but also on the likelihood that tourism and consequently air flights could be the first to suffer. The USD and other safe havens are set to benefit if this news does develop though it may be some days before the seriousness of this virus becomes known. Gold gave back some of its gains during the European morning following last week's news that the China had increased its holdings of gold by 76% since 2003.

The USD initially gave back some of its overnight gains vs. the EUR. EUR/USD bounced from the 1.3122 level and a choppy session has ensued. In addition to the Swine Flu news, the USD has been supported by a press report that German banks potentially face another EUR812 bln in write downs. The tone of the EUR, however, has been lifted by a better than expected German April Gfk consumer confidence survey (2.5) and an upturn in the Italian April consumer confidence data (104.9 from 99.8 in Mar). Following last week's better than expected PMI and German IFO data optimism is spreading that the euro zone may have seen the worse of the downturn and hopes that the ECB will further the less gloomy economy outlook by adopting some form of quantitative easing at next week's ECB meeting are high.

Cable has been pivoting around the 1.4550 level ensuring that the EUR/GBP takes it lead from EUR/USD. The UK press continue to digest the implications of last week's Budget and importantly the reaction of the opposition conservative party who are expected to takes the government's reins next year. If the electorate give the conservative party increased support an austere budget can be expected next year. This will relieve some of the present concerns over the sharp deterioration of UK public finances and put in place the potential for some longer term relief for the pound.

USD/JPY has been reluctant to hold below the 96.50 level in European hours. However, a continuation of the Swine Flu reports should keep the JPY bid.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 4/27/2009 12:45 GMT CA Ministers Flaherty, Baird and Bryant Speak in Toronto 27-Apr

  • 4/27/2009 13:00 GMT EC EU Parliament's Foreign Affairs Committee Meets 27-Apr

  • 4/27/2009 14:30 GMT US Dallas Fed Manf. Activity APR -49.00% -42.00%

  • 4/27/2009 16:00 GMT FR Total Jobseekers MAR 2384.8 - -

  • 4/27/2009 16:00 GMT FR Jobseekers- Net Change MAR 79.9 - -