Euro Soft As Focus Turns To Spain's GDP: April 30, 2012

The euro is mildly softer against most major currencies except the dollar as investors' focus is on Spain's GDP data today. Economists are expecting Spanish economy to contract -0.4% qoq in Q1, another -0.1% contraction in Q4. S&P downgraded Spain two notches to BBBB+ with negative outlook last week and noted deteriorating budget trajectory on worsening recession.

Spanish 10-year yield was back at around 6% level but avoided sharp jump so far. In addition, it's reported that the government is discussing with banks a new scheme to isolate banks from toxic assets and segregate these assets into a government-financed "bad bank." Though, there were also talks that there wouldn't be such a "bad bank" but rather a private fund run asset management company that would manage risks of the toxic assets.

San Francisco Fed Williams said that the worst of the European debt crisis is not yet over and he's "very concerned about the risks of a renewed worsening of the debt situation in the European financial system." He said that "when the economy is weak and so many countries are cutting back at the same time, it will make it more difficult for countries with problems to return to a normal economic situation." Regarding US, Williams said unless the unemployment rate stagnates or rises sharply, "there is no necessity for new monetary policy measures."

New Zealand reported a lower-than-expected trade surplus of NZD 134m in March, versus expectation of NZD 417m. Imports totaled NZD 4.08b, up 19.7% from February's figure. Exports totaled NZD 4.22b, up 16.7% from February. The data has little impacted the kiwi, though, as markets are expecting RBNZ to hold rates unchanged at 2.50% until at least then end of the year and might even prolong further.

Looking ahead, eurozone M3 and CPI flash with be released in European session. CPI is expected to slow to 2.5% yoy in April. Canada GDP will be a data to watch and is expected to rise 0.2% mom in February US personal income and spending are expected to rise 0.3% and 0.4% respectively. Headline PCE is expected to slow to 2.2% yoy in March while core PCE is expected to be unchanged at 1.9% yoy.