– Lower Chinese inflation, earnings and Bernanke to help risk-sentiment today
Risk-sentiment should be better supported today helped by a strong start to US earnings season and much softer data from China (2.1% vs. 2.5% expected). In comments yesterday, Chairman Bernanke indicated that the economy was still far away from desired performance levels. Importantly, he also mentioned that asset sales (to shrink balance sheet) will be used late in the policy exit process, and instead that the “interest on excess reserves” will be the main tool. These comments suggest that any policy exit will be gradual. Tomorrow’s FOMC minutes release (which typically sounds hawkish) are likely to be seen as ‘dated’ after the payrolls report, and we still like selling USD against AUD, CAD and EUR. In the European session, UK industrial production data (09:30 BST) will dominate but any strength should offer temporary GBP support.
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BNP Paribas