Risk trades ran for cover once again in the NY session as economic news out of the US was disappointing to say the least. Retail sales dropped -0.4% in the month of April following a -1.3% decline the prior month. The market was looking for a flat read and given the optimism of late was probably priced for an increase. Reality bites and the S&P sank -2.7% on the follow to close just above crucial 880 support.

Gold was bid on the flight to safety and now has the top of the Ichimoku cloud (935.90) within striking distance. A daily close above there would be bullish for the precious metal. US Treasuries were bought in size again despite the massive supply coming to the market. The 10-year yield sank to 3.12% after testing near 3.30% just days ago. The yen crosses were also ''offered'' on the same logic with USD/JPY sinking -70 pips to 95.30 and EUR/JPY dropping -120 points towards the 129.60/65 zone.

Euro was relatively mixed on the back of diverging comments from a couple of ECB members. Kranjec suggested that the bank may do more quantitative easing than expected as he noted that the bank is "likely" to buy more than the announced EU60 billion in covered bonds. He went on to say that they cannot exclude the purchase of corporate bonds and commercial paper and that the "ECB has no limits with funds". The headlines suggested a more aggressive ECB in terms of the willingness to "print" the eurozone out of the recession. Musings such as these are EUR negative.

ECB's Weber contradicted this, however, saying that EU60 billion is the maximum the ECB will buy in covered bonds. While this was initially EUR positive, as less quantitative easing would be less dilutive to the currency, the fact that the ECB is contentious on the matter is not a good thing. In the end, EUR/USD dropped a modest -25 pips towards 1.3600 in the session.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 5/13 22:30 GMT NZ  Business NZ Publishes Performance of Manufacturing Index
  • 5/14 1:00 GMT AU  Consumer Inflation Expectation  MAY  2.40%  - -
  • 5/14 3:00 GMT NZ  Non Resident Bond Holdings  APR  73.20%  - -