Asia started this week with the USD broadly higher following the strong US jobs report on Friday. Activity was subdued but the USD’s bid tone remained intact.
On the data front we were mostly focused on Australia and each release beat market expectations and mildly favoured the AUD. The trade deficit narrowed to –A$1.46 bln in September from a downwardly-revised A$1.87 bln in August as imports slowed at a faster rate than exports. Exports were down 1.0% on-month with a slowdown in iron ore and natural gas revenues on lower prices partly negated by better exports for coal. Imports fell 2.2 percent on-month.
Retail sales were marginally better than expected, rising 0.5 percent m/m in September with discretionary spending on household goods firming slightly. This may suggest that the previous RBA cuts are eventually filtering though into the consumer economy and may stay the RBA’s hand at tomorrow’s meeting. Sentiment is evenly split for a 25bp cut or no change though interest rate markets are pricing in just below 50 percent chance of a cut.
The other data was contradictory for the RBA – new vehicle sales were a very firm +12.2 percent higher y/y but job advertisements saw a 4.6 percent decline in October, the seventh straight month of falls and suggesting a worsening outlook on the unemployment front.
At the weekend we saw better services PMI data from China with the official reading improving to 55.5 from 53.7. The HSBC survey, which focuses more on the SME sector declined to 53.5 from 54.3. China’s major focus this week will be the start of the 18th National Party Congress on Thursday and the economic data for October on Friday.
The US Dollar received a boost across the board on Friday as the US non-farm payroll report beat expectations. 171k jobs added in October and upward revisions to previous months’ figures saw the USD index power higher to touch its 200-day moving average at 80.67, its highest since September 7, though the unemployment rate remained high at 7.9 percent as more people restarted looking for jobs. EURUSD also tickled its 200-day MA at 1.2830 but it continues to be a magnet (for now). USDJPY edged higher to retest June highs at 80.67. CAD also firmed on better Canadian jobs data and despite lower oil prices.
Now we switch to election watch. Note the US pushed their clocks back at the weekend so data releases will be one hour later.
Data Highlights
US Oct. Change in Nonfarm Payrolls out at +171k vs. 125k expected and revised 148k prior
US Oct. Unemployment Rate out at 7.9%, as expected vs. 7.8% prior
US Sep. Factory Orders out at +4.8% m/m vs. 4.6% expected and revised -5.1% prior
China Oct. Non-manufacturing PMI out at 55.5 vs. 53.7 prior
AU Oct. Performance of Services Index out at 42.8 vs. 41.9 prior
AU Oct. TD Securities Inflation out at +0.1% m/m,+2.4% y/y vs. 0.2%/2.4% prior resp.
UK Oct. Lloyds Employment Confidence out at -35 vs. -49 prior
AU Sep. Trade Balance out at –A$1456 mln vs. –A$1550 mln expected and revised –A$1876 mln prior
AU Sep. Retail Sales out at +0.5% m/m vs. 0.4% expected and revised +0.3% prior
AU Oct. ANZ Job Advertisements out at -4.6% m/m vs. revised -3.9% prior
China Oct. HSBC Services PMI out at 53.5 vs. 54.3 prior
Upcoming Economic Calendar Highlights (All Times GMT)
Sweden PMI Services (0730)
UK PMI Services (0930)
EU Sentix Investor Confidence (0930)
SI PMI (1330)
US ISM Non-manufacturing (1500)
Andrew Robinson,
SAXO BANK