ASIA SUMMARY

Asia saw a mostly dollar selling tone after GBP/USD had a clean break through the psychological 2.0000 level. EUR/USD grinded higher and continues to base in front of the 1.3600 level. USD/JPY was weak and dragged JPY crosses lower with it as market rumors circulated that Japan may hike interest rates again in May.

Dollar sellers were helped in part by momentum in Kiwi from mixed data CPI data. Kiwi initially traded lower after Q1 CPI came in at .5% quarter over quarter vs. .6% consensus. However, Q1 CPI of non-tradables came in at 1.2% quarter over quarter vs. previous .8%. The higher number brought buyers in Kiwi and pushed it through the March 2005 highs.

With JPY crosses showing a bit of weakness after their recent rally, it seems that the focus in Asia may be focusing again on Japanese interest rates. It is widely believed that Japan is in a tightening cycle but the speed of interest rate increases is what is keeping the JPY weak. Should we see strong Japanese data going forward, expect more concern that Japan will raise interest rates sooner rather than later.

Upcoming Data Release (UK Session):

Japan: (1am EDT) Leading Economic Index expected 27.3% vs. previous 30%. Coincident index expected 15% vs. previous 16.7%. (2am EDT) Year over year machine tool orders previous 9.5%.

Germany: (3am EDT) ECB’s Mersch holds briefing in Luxembourg.

EC: (3am EDT) European Commission holds weekly meeting.

UK: (4:30am EDT) Bank of England Minutes. Jobless claims change expected -5k vs. previous -3.8%. ILO Unemployment Rate expected 5.5% vs. previous 5.5%.