Another session of consolidation for currencies during the Asian session with data releases second-tier. Just prior to the lunch break, rumours circulated of an imminent China rate cut which saw both the Shanghai Composite and risk in general better bid.
In Australia, Westpac’s latest leading index was quite underwhelming, with the index rising 0.2 percent m/m in February. On an annualized basis, the increase was a mere 2.4 percent, well below the long-term trend of 2.9 percent and even below January’s annualized 2.6 percent. The index is seen as indicating economic activity in 3 to 9 months time and such a weak result adds to the growing argument for future rate cuts from the RBA.
Bank of Japan deputy governor Nishimura trotted out the customary dovish chat that additional steps would be taken as necessary to support recovery signs and boost potential growth to defeat deflation. Note that overnight the IMF also concluded that Japan may need additional stimulus, in its latest global outlook report. USDJPY pushed to session highs above 81.0 after the comments.
The EUR held steady at higher levels overnight, having balked at yesterday’s attempt to break below the key 1.30 mark versus the dollar. A number of EUR-positive developments emerged overnight, with a relatively decent outcome at the Spanish T-bill auction quickly followed by some upbeat assessments of consumer confidence in both Germany and Euro-zone from the ZEW surveys. German confidence was notably near a 2-year high of 23.4 in April, following 22.3 in March and this was the fifth straight month of gains.
From the UK, inflation rose for the first time in six months hitting 3.5 percent y/y from 3.4 percent the previous month which gave the GBP some support. Though, as Nick points out, this is likely to be a temporary blip in the scenario of further QE measures from the Bank of England.
The Bank of Canada left rates unchanged at its April meeting, as expected, but was surprisingly hawkish in its accompanying comments. It suggested that some modest withdrawal of monetary stimulus may become appropriate but such a withdrawal would be weighed carefully against domestic and global developments. The economy is seen returning to full capacity in the first half of next year, earlier than expected in its last review in January which suggested Q3 2013. CAD firmed across the board with USDCAD sliding to a 4-week low. watch for the BOC Monetary Policy Report later today for more clues.
In its World Economic Outlook, the IMF adjusted its global growth forecasts marginally higher to 3.5 percent for 2012 and 4.1 percent for 2013, up from 3.3 percent and 3.9 percent previously, though it warned that the world economy is extremely fragile and faces an “uneasy calm”. Another flare-up in the Euro-zone debt situation or a sharp escalation in oil prices on the back of geopolitical uncertainty could suddenly reverse the slightly better outlook.
Data Highlights
CA Feb. Manufacturing Sales out at -0.3% m/m, as expected vs. revised -1.3% prior
US Mar. Housing Starts out at -5.8% m/m vs. 1.0% expected and revised -2.8% prior
US Mar. Building Permits out at +4.5% m/m vs. -0.7% expected and revised +4.8% prior
CA Bank of Canada leaves key rates unchanged at 1.0%
US Mar. Industrial Production out at flat m/m vs. +0.3% expected and flat prior
US Mar. Capacity Utilization out at 78.6% vs. 78.5% expected and 78.7% prior
AU Feb. Westpac Leading Index out at +0.2% m/m vs. revised +0.7% prior
NZ Apr. ANZ Consumer Confidence out at +3.4% m/m vs. -2.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Sweden Riksbank Rate Announcement (0730)
EU Euro-zone Current Account (0800)
UK BOE Minutes (0830)
UK Claimant Count Change (0830)
UK Avg. Weekly Earnings (0830)
UK ILO Unemployment Rate (0830)
EU Construction Output (0900)
Swiss ZEW Survey (0900)
EU ECB’s Gonzalez-Paramo to speak (1100)
US MBA Mortgage Applications (1100)
CA BOC Monetary Policy Report (1430)
Andrew Robinson,
SAXO BANK