Brave New World

Daily Currency Outlook 16/04/2009

EURUSD: Bearish Sell at 1.3148. Target 1.3080. 

GBPUSD: Bullish. Buy at 1.4880*(current spot rate). Target 1.50

USDJPY: Bullish: Buy on dips below 99

Risk aversion has been creeping back into the market in the last couple of hours, as poor economic data from China and the Eurozone has dampened sentiment from an earlier rally in equities in New York and Asia. China showed slightly worse than expected GDP figures- an annualised 6.1% in Q1- while the Eurozone showed continued signs of weakness, with CPI and industrial production data giving their weakest readings since records began at 0.6% and -18.4%  year on year respectively. Earlier, equity markets were bolstered by the US Beige Book survey which revealed signs that the financial turmoil may be easing, and data from American Express showing that bad loans had increased at a slower rate in March than in previous months. The JPY has been the chief beneficiary from this bearish sentiment, with EURJPY reaching 129.36, its lowest level since March 31st. The JPY also strengthened earlier against the USD, following the poor Chinese GDP figures. In the UK, the BRC Retail Sales Monitor showed a decline in transactions of 1.2% y/y in March, following a drop of 1.8% in February. Total sales rose 0.6% after a rise of 0.1% in the previous month.

As has been the theme in recent weeks, much depends on risk sentiment which in turn depends on the market’s confidence that the financial system is beginning to function properly again. Figures out from JP Morgan later this morning will be a very important pivot.