Japan’s monetary base fell for the first time in more than three years in March, triggering some volatility in USDJPY early in the Asian session. The kneejerk reaction was to sell USDJPY as the possibility of no further easing from the Bank of Japan gained momentum and the pair slumped to an 81.55 low. Thereafter we traded in a tight 81.70-90 range.
We had yet another “unbelievable” PMI number out of China this morning with non-manufacturing PMI rising to 58.0 in March from 48.4 last time. This marked the highest point since September 2011 and means the index has only spent 2 months below the key 50 threshold in the last 12 months. So much for the China slowdown….
The other data release of the session was not quite so exciting: Australia’s retail sales were a tad softer in February, but bang on forecast at +0.2 percent m/m. Last month’s strong spending in restaurants could not be repeated but the “other retailing” category showed the most improvement. The breakdown state-by-state reinforced the two-tier nature of the local economy, with sales in Queensland and WA rising 1.5 percent and 1.0 percent respectively while New South Wales’ sales were down 0.6 percent. AUD had a brief dip post-data but settled in the upper half of the day’s range ahead of the RBA announcement.
The RBA left the cash target rate unchanged at 4.25 percent and in the statement said it was prudent to wait to analyze inflation data (due on April 24) before considering easing. It admitted that growth had been below expectations but did not see any signs of a deep global slowdown. The housing market remains soft though there have been signs of stabilization, it added. Meanwhile Australia’s Terms of Trade appear to have peaked but remain at high levels. AUD was slow to react to the announcement but is slowly edging lower at time of writing.
Yesterday’s data releases confirmed that Europe appears sandwiched between Asia and the US, both geographically and economically, as PMI data for March produced differing results. On the one hand both China and US announced strong readings (53.1 and 53.4 respectively, though our thoughts on the China data were well-documented yesterday) whereas the Eurozone and Germany reported disappointing results – 47.7 and 48.4 respectively, while Spain’s slumped to a lowly 44.5. This helped thwart the EUR’s more bullish tendencies from the Asian session yesterday and took us briefly back below 1.33 again. The other standout PMI number came from the UK, which rose to 52.1 from 51.5 (third month in a row we’ve been above the 50 threshold) and this helped GBPUSD to cement its hold above 1.60.
From North America, as mentioned above the ISM manufacturing was above forecast but prices paid were a disappointing 61.0 versus 63.0 expected and 61.5 last. Construction spending also slumped 1.1 percent m/m after a 0.8 percent decline in January, providing additional fuel for the notion that the recent rebound in housing sector may be faltering. The CAD finished stronger on the day as BOC’s Carney gave a more upbeat assessment of the Canadian economy, saying it has been somewhat stronger than the central bank expected.
Data Highlights
US Feb. Construction Spending out at -1.1% m/m vs. +0.6% expected and revised -0.8% prior
US Mar. ISM Manufacturing out at 53.4 vs. 53.0 expected and 52.4 prior
US Mar. ISM Prices Paid out at 61.0 vs. 63.0 expected and 61.5 prior
JP Mar. Monetary Base out at -0.2% y/y vs. +11.3% prior
China Mar. Non-manufacturing PMI out at 58.0 vs. 48.4 prior
JP Feb. Labour Cash Earnings out at +0.7% y/y vs. -0.9% prior
AU Feb. Retail Sales out at +0.2% m/m, as expected vs. +0.3% prior
AU RBA leaves Cash Target unchanged at 4.25%
Upcoming Economic Calendar Highlights
(All Times GMT)
UK PMI Construction (0830)
EU Eurozone PPI (0900)
SI PMI (1330)
US ISM New York (1345)
US Factory Orders (1400)
US FOMC Minutes (1800)
Andrew Robinson,
SAXO BANK