The first of today’s central bank rate announcements came early in the Asian session, where the RBNZ kept the official cash rate unchanged at 2.5 percent, as expected. However, in his post-announcement comments, RBNZ governor Bollard highlighted improved pockets in the domestic economy and a better global outlook but noted that the recent strength of the NZD could delay the tightening cycle. This was enough to knock the NZD off its early highs and we traded generally softer throughout the rest of the session.
The Australian employment report was a market mover, with the headline employment change showing 15.4k jobs lost in February, far worse than the small 5.0k consensus (though the spread on forecasts was extremely wide). The kneejerk reaction was a 40 point gap lower in the AUDUSD with a slight uptick to the unemployment rate to 5.2 percent from 5.1 percent (and a tiny drop in the participation rate to 65.2 percent from 65.3 percent) confirming the weaker bias. However, all the jobs that were lost came in the part-time category, with full-time flat on the month, and we saw a 20-30 point rebound from the lows to trade mid-range before a quick stop-loss hunt above 1.06 at time of writing.
The slew of Japanese data produced an upward revision to final GDP data for the fourth quarter at -0.2 percent q/q from -0.6 percent, with improved capital spending accounting for most of the improvement. In contrast, Japan posted a record current account deficit in January, rising to ¥437.3 bln from a surplus of ¥303.5 bln. The 11th straight m/m deterioration came as a result of a dismal performance on the trade balance which blew out 245.9 percent to a ¥1,3816 bln deficit as the double whammy of sluggish exports and rising imported energy costs took its toll. The worse figure came despite a higher income surplus of ¥1,1326 bln. USDJPY and the JPY crosses edged higher after the data but still held a tight range.
Risk assets perked up in the latter part of the overnight session as better US jobs data helped sentiment. The EUR traded in a tight band versus the US dollar as the markets continue to count down to the next PSI deadline on Greek debt while GBP attempted one push through 1.57 versus the USD following less-hawkish comments from BOE’s Dale (inflation to fall to low 3s by spring and gradually ease during the rest of the year to reach the target of 2 percent) but found strong support there. The Dutch finance minister commented that they were willing to increase the size of the EUR rescue fund.
On the data front, the private US ADP employment report showed the US economy added 216k jobs in January, very close to the 215k consensus and well above last month’s 173k. This has raised hopes for a good non-farm payroll report on Friday but bear in mind the correlation last month was severely lacking. Non-farm productivity rose 0.9 percent q/q in the final reading for Q4 but unit labour costs were dramatically higher, rising 2.8 percent q/q from 1.2 percent in Q3.
Data Highlights
US Feb. ADP Employment Change out at +216k vs. +215k expected and revised +173k prior
CA Jan. Building Permits out at -12.3% m/m vs. -3.2% expected and revised +10.5% prior
US Q4 Final Non-farm Productivity out at +0.9% q/q vs. 0.8% expected and 0.7% prior
US Q4 Final Unit Labour Costs out at +2.8% q/q vs. 1.2% expected and 1.2% prior
US Jan. Consumer Credit out at $17.78b vs. $10.45b expected and revised $16.26b prior
NZ RBNZ leaves Official Cash Rate unchanged at 2.5%, as expected
JP Q4 Final GDP out at -0.2% q/q, as expected and -0.6% prior
JP Feb. Bank Lending out at +0.8% y/y vs. +0.7% prior
JP Jan. Current Acct. Balance out at -¥437.3b vs. -¥320.0b expected and +¥303.5b prior
JP Jan. Trade Balance (BOP) out at -¥1381.6b vs. -¥1370.3b expected and -¥145.8b prior
AU Feb. Employment Change out at -15.4k vs. +5.0k expected and revised +46.2k prior
AU Feb. Unemployment Rate out at 5.2%, as expected vs. 5.1% prior
Upcoming Economic Calendar Highlights (All Times GMT)
JP Economy Watchers Surveys (0500)
JP Machine Tool Orders (0600)
Swiss CPI (0815)
Sweden Avg. House Prices (0830)
GE Industrial Production (1100)
UK BOE Rate Announcement (1200)
US Challenger Job Cuts (1230)
EU ECB Rate Announcement (1245)
US RBC Consumer Outlook Index (1300)
CA Housing Starts (1315)
CA New House Price Index (1330)
US Initial Jobless Claims (1330)
CA Bank of Canada Rate Announcement (1400)
US Bloomberg Consumer Comfort Index (1445)
Andrew Robinson,
SAXO BANK