Investors confidence continue to be supported by rumor or strong data from China. Reuters, quoting 3 unidentified persons, said that China's exports expanded +50% y/y in May and new loans reached +RMB 630B, exceeding consensus forecasts of RMB 600B. China stocks rose the most in two weeks with Shanghai composite index climbed 2.8% and lead European Stocks and commodities higher. Dollar index extends yesterday's retreat and drops below 88 level.
IMF Deputy Managing Director Naoyuki Shinohara said today that recovery in most advanced economies are subdued. Also, one of the key concerns is that there is limited room for continued policy support. Also, Naoyuki warned that adverse developments in Europe could disrupt global trade, with implications for Asia given the still important role of external demand.
ECB Trichet urged greater integration of economic policies among Eurozone members in a speech today. He emphasized that monetary union is not a matter of convenience; it offers us protection and improves resilience, provided that we embrace the underlying ideas and principles. A quantum leap in strengthening the governance of economic policies and surveillance is needed and financial institutions should reestablish a sense of values, in particular a strong sense of responsibility vis-a-vis the real economy. And, legislators and regulators may have to introduce a new set of incentives for those operating in the financial sector.
France President Nicolas Sarkozy and German Chancellor Angela Merkel write in a joint letter to seek proposals from European Commission President Jose Manuel Barroso on a ban on so-called naked short sales of “certain” stock and bonds, as well as on naked credit-default swaps on sovereign bonds. They called for the proposals to be ready by the middle of next month rather than October as had been planned.
Looking ahead, Fed Chairman Bernanke's testimony at House Budget Committee will be the main focus today. Bernanke sounded a bit upbeat earlier this week and said that there was a good bit of momentum in consumer spending and investment and signs that private sector is picking up the baton. Though, Bernanke also noted that the recovery might not bring down unemployment quickly, which would stay high for a while. Bernanke is expected to repeat similar comments and the optimistic message would likely provide some more support to investor sentiments. Fed will also release Beige Book economic report.
RBNZ rate decision will be the main focus in coming Asian session. Currently, interest-rate swaps indicate an 80% chance the RBNZ will raise the cash rate by +25 bps points to 2.75% in June. The market had priced in chances of 52% on May 21 and 64% after April's meeting. Despite uncertainty in Eurozone's sovereign crisis, the hike is warranted as recent data has shown robust domestic economic growth. More in RBNZ To Begin Its Normalizing Process In June
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1913; (P) 1.1960 (R1) 1.2020;
EUR/USD's consolidation from 1.1875 is still in progress and more recovery might be seen to 4 hours 55 EMA (now at 1.2126). Nevertheless, upside should be limited by 1.2330 resistance and bring fall resumption. Below 1.1875 will target 100% projection of 1.5143 to 1.3266 from 1.3691 at 1.1814 and then 1.1639 key support.
In the bigger picture, whole down trend from 2008 high 1.6039 has resumed and should should now target 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. Nevertheless, strong support might be seen between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 and bring reversal. But after all, On the upside, break of 1.2671 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised 23:00 USD Fed Hoenig Speaks in Kansas City Missouri -- -- 23:01 GBP BRC Shop Price Index May 1.80% -- 2.00% 23:50 JPY Machine Orders M/M Apr 4.00% 1.70% 5.40% 0:30 AUD Westpac Consumer Confidence Jun -5.70% -- -7.00% 6:00 JPY Machine Tool Orders Y/Y May P 191.80% -- 220.90% 8:30 GBP Visible Trade Balance (GBP) Apr -7.3B -7.0B -7.5B 14:00 USD Wholesale Inventories Apr 0.70% 0.40% 14:00 USD Fed Bernanke Testifies at House Budget Committee -- -- 14:30 USD Crude Oil Inventories -1.1M -1.9M 18:00 USD Fed Beige Book -- -- 21:00 NZD RBNZ Interest Rate Decision 2.75% 2.50%