Currencies were steady at lower levels in the Asian session Wednesday, though a slight uptick in risk appetite was felt towards lunchtime. In EURUSD, the early attempt at a rally was rebuffed at the 1.2330 level in the US session after the German Constitutional Court delayed its decision on whether ratification of the new ESM framework is legal.
On the data front, the Australian consumer remains quite upbeat in July according to Westpac’s reading of consumer confidence, with confidence rising to a 5-month high, rallying 3.7 percent from a month ago as households respond to the 75bp worth of RBA rate cuts since April. While seen as a positive, Westpac itself cautions against reading too much into the firmer data with the uncertain external situation, both with China imports and the European situation, clouds on the horizon.
Japan’s tertiary industry index rose 0.7 percent in May from a month ago, the fastest rate of gains this year as spending picked up the wholesale and retail sector. Japan’s corporate goods prices continued their downward trend in June, falling 0.6 percent from a month ago (the third decline in a row) and 1.3 percent from a year ago. The data suggests the bank of Japan is having a difficult time in making any inroads to achieve its medium-term 1 percent inflation target. Indeed, June CPI rose a paltry 0.2 percent y/y after hitting a near-term peak of 0.5 percent in March.
The Bank of Japan starts its 2-day meeting today and is widely expected to leave rates unchanged and not announce any new easing measures. Recent BOJ rhetoric has been slightly more positive on the economy and this was borne out by the latest Tankan survey which showed improvement across all sectors. Any comments on the inflation outlook/target could move markets, more likely as a disappointment. The decision is expected around 0400GMT tomorrow.
Meanwhile in Europe, in addition to the German Constitutional Court news, German Chancellor Merkel warned that German growth would be lower this year and the pair pushed back to 2012 lows and hovered there for the rest of the session. GBP also had its ups and downs with a rally prompted by better industrial production and trade data ran out of steam and reversed as the NIESR GBP estimate for June slid back into negative territory with a -0.2 percent q/q print.
From the US, small business optimism waned with the NFIB index falling to 91.4 from 94.4 (93.3 expected) though the IBD/TIPP reading on economic optimism ticked higher to 47.0 from 46.7, so mixed readings there. Other data showed JOLTs job openings rising to 3,642, the best in 5 months, after last month’s surprise dip to 3,416. Wall ST suffered after profit warnings ahead of the Q2 reporting season with the DJIA losing 0.65 percent, the S&P 0.81 percent and the Nasdaq -1.0 percent.
Data Highlights
CA Jun. Housing Starts out at 222.7k vs. 205k expected and revised 217.4k prior
US Jun NFIB Small Business Optimism out at 91.4 vs. 93.3 expected and 94.4 prior
US Jul. IBD/TIPP Economic Optimism out at 47.0 vs. 46.9 expected and 46.7 prior
US May JOLTS Job Openings out at 3,642 vs. 3,588 expected and revised 3,447 prior
UK Jun. NIESR GDP Estimate out at -0.2% q/q vs. +0.1% prior
JP May Tertiary Industry Index out at +0.7% m/m vs. 0.2% expected and revised -0.2% prior
JP Jun. Dom. Corporate Goods Prices out at -0.6% m/m, -1.3% y/y vs. -0.4%/-1.0% expected and revised -0.5%/-0.7% prior resp.
AU Jul. Westpac Consumer Confidence out at +3.7% m/m vs. +0.3% prior
AU May Home Loans out at -1.2% m/m vs. +0.8% expected and revised +0.5% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
GE CPI – Final (0600)
JP machine Tool Orders (0600)
US MBA Mortgage Applications (1100)
CA Int’l Merchandise Trade (1230)
US Trade Balance (1230)
US Wholesale Inventories (1400)
Andrew Robinson,
SAXO BANK