– AUD down 0.6%, Asian stocks down 0.1-1.1%
– Weak Australia CPI supports RBA easing
– Italian bond auction in focus
– Hungary MC to keep rates on hold at 7%
What to watch for today
HUF: On hold. We expect the Monetary Council (MC) to keep rates on hold at 7.0% and to maintain a “cautious” monetary policy given the uncertainties over the EU/IMF negotiations and funding conditions in Europe. Despite the near-term political noise, we remain medium-term constructive on HUF (see Hungary: A Grand Bargain?, published on 18 April 2012). We think the high yield in HUF offers adequate risk premium compensation to investors and progress on fiscal consolidation should improve the forint’s long-term outlook. We maintain a EURHUF downside structure in our derivative portfolio and added a short PLNHUF position to our cash model portfolio last week.
EUR: Italy will auction 2014, 2017 and 2019 bonds. Weak demand would add to further downward pressure on the euro, in our view.
CAD: Mixed retail sales. Our economists expect today’s retail sales to show a weak -0.3%mom headline, but with a 0.6%mom core print. The hawkish turn taken by the Bank of Canada last week suggests, in our view, that CAD price action is likely to be increasingly data dependent. Data in line with our estimates would be slightly below consensus. While this alone might not warrant a weaker CAD, we think an extension of the recent risk-off trend might contribute to undermining support for the currency in the near term. We remain neutral on USDCAD and target parity in three months time.
USD: Confidence boost. Our economists expect consumer confidence to increase from 70.0 to 72.0 in the month of April, above consensus which is set for a flat print, and a 315K reading on new home sales, de facto unchanged from last month’s 313K. Stronger confidence data point might be beneficial for risk appetite on the margin, but with the FOMC meeting around the corner, we expect any potential impact on price action to be relatively muted.
Click here to read the full report: European FX Daily
Credit Suisse
Fixed Income Research & Analytics