Morning Currency Wrap for Friday April 15, 2011

Chinese GDP & Inflation and Irish Downgrade & Upgrade  - The Asian session started with a bang as Chinese economic data spurred risk aversion spurring the Yen higher because the data demonstrated that China still has work to do in terms of tightening monetary policy. China’s economy  grew 9.7% in Q1, while consumer prices increased 5.4% in March from a year earlier. In the European session, all eyes were on Ireland as Moody's Investors Service downgraded Ireland's foreign and local currency government bond ratings by two notches to Baa3 from Baa1 with the outlook remained negative. In essence, Moody's cut Ireland's rating to just above junk status. However, yesterday Fitch Ratings affirmed Ireland at BBB+ and removed it from Rating Watch Negative to negative outlook. Confused? I am. In sports betting they call that a push so I will choose to shake it off and move on and that is exactly what the Euro did. Today's euro zone inflation numbers came in a little higher than the flash reading, reaffirming views that the European Central Bank will continue to raise rates in coming months. The ECB raised rates by 25 basis points last week and the market is pricing in two more rate increases before year end. In the US today, the CPI data showed that consumers paid more for food, gas and rent last month, but outside those categories inflation remained tame, which allowed the USD to extend its gains against the Euro. In Canada, the CAD softened a little against the USD as the price of oil weakened and on concerns that the Chinese will have to be more aggressive on interest rate hike, which could possibly change the outlook for global growth. With no domestic data out today, I expect the CAD is stay within range. I don't see much downside in the CAD with plenty of sovereign interest to buy CAD out there.

Here are the interbank mid-market rates at the time of posting:

EUR/USD    1.4431            USD/CHF      0.8940

GBP/USD    1.6346            USD/CAD      0.9642

AUD/USD   1.0559            EUR/CAD      1.3917

NZD/USD    0.7968            GBP/CAD      1.5763       

USD/JPY      83.08             USD/MXN     11.7175