It was another session of quiet musings for currency markets during the Asian session with very little to drive activity from either headlines or data.
The highlight was the release of the minutes from the Reserve Bank of Australia’s December meeting which proved to be a tad more optimistic on the domestic front, and less-dovish overall, than had been anticipated. The RBA commented that increasing downside risks from Europe was the major factor in delivering a “modest” rate cut, with other factors including an investment boom, a domestic economy that is growing at trend and strong growth among its major trading partners suggesting there was no great need to cut rates. The Board noted that growth rates across Asia, and in particular China, had been strong while the recent Australian data had been slightly better than mid-year (though we believe all that is about to change heading into 2012). Generally, there seemed to be no specific hints of aggressive rate cuts in the immediate pipeline and AUD rallied back through 0.99 versus the US dollar during the session.
The only other data release of note was the UK’s Nationwide consumer confidence survey for November which showed a mild rebound from October’s record low but still at the second-lowest level in the survey’s seven-year history. All indicators remained depressed and reflected the fact that the survey was taken after Chancellor Osborne had unveiled further austerity measures and a gloomy downgrade to 2012 growth forecasts on November 29. GBP was unmoved by the data.
The first signs of markets winding down in the run in to the holiday season were evident in the tight ranges seen in currency markets in both the European and North American sessions yesterday. The meeting of EU finance ministers was a non-event with the outcome merely a rubber-stamping of the EU summit deal to provide EUR 150 bln of funding to IMF general funds (minus the UK’s contribution as its stance not to contribute remains unchanged). ECB’s Draghi spoke at the EU parliament but offered nothing new apart from stressing the need for bank sector recapitalisation and recognising downside risks ahead to growth.
Data during the North American session was mildly positive with Canada’s retail sales rising 0.9 percent m/m in October, higher than the upwardly-revised +0.5 percent the previous month, and continuing the recent spate of upward surprises. The US NAHB housing index also improved, rising to 21 from 19 prior and above consensus of 20. Wall St was hampered by a slide in financial counters (Bank of America in a late slide below $5 for the first time in nearly three years) with the DJIA losing 0.84 percent, S&P 1.17 percent and the Nasdaq 1.26 percent.
Data Highlights
CA Oct. Wholesale Sales out at +0.9% m/m vs. +0.1% expected and revised +0.5% prior
US Dec. NAHB Housing Market Index out at 21 vs. 20 expected and revised 19 prior
AU Oct. Conference Board Leading Index out at +0.6% vs. revised +0.6% prior
UK Nov. Nationwide Consumer Confidence out at 40 vs. 36 expected and 36 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP All Industry Activity Index (0430)
JP Leading/Coincident Index (0500)
GE GfK Consumer Confidence (0700)
GE Producer Prices (0700)
Swiss Trade Data (0700)
Sweden Riksbank Rate Announcement (0830)
GE IFO Surveys (0900)
UK CBI Reported Sales (1100)
CA CPI (1200)
US Housing Starts (1330)
US Building Permits (1330)
Andrew Robinson
SAXO BANK