The Asian session kicked off with the release of New Zealand’s trade data for February, which showed a welcome rebound from January’s disappointment. The balance reverted back into surplus with +NZ$161 mln print, slightly better than the consensus +NZ$153 mln, compounded by an upward revision to January’s deficit to –NZ$159 mln, which gave the NZD an upward tilt early in the session. There is some caution reading too much into the improvement in the data, with both exports and imports hit by a strike at the port of Auckland. The New Zealand export sector still faces struggles with lower dairy prices and slowing global demand.
In the broader market, risk started the week on a slightly firmer footing as the market reacted to weekend press reports that Germany will bow to pressure and allow Europe’s EFSF and ESM bailout funds to be combined for a transitory period at this week’s EU/EcoFin meeting (Friday). That would boost firepower to €940 bln, maybe an important development ahead of Spanish and Italian debt auctions starting tomorrow.
The latest IMM data (as at last Tuesday) showed some significant position changes in major currency pairs. USD longs and JPY shorts were reduced by $4.3 bln and $2.5 bln respectively as the USDJPY rally appeared to run out of steam and brought both currencies back from extreme levels last week. GBP and CAD have both hit their largest long positioning of 2012 while the NZD has moved back to its lowest long position since early-January.
The dollar weakened on Friday as US data disappointed, US Treasury yields edged lower and general position-squaring ahead of the weekend took their toll. US new home sales declined 1.6 percent m/m compared to a +1.3 percent consensus, compounded by a hefty downward revision to -5.4 percent m/m from -0.9 percent the previous month. Absolute numbers fell to 313k from 318k. Meanwhile a large US homebuilder reported lower-than-expected earnings in Q1 while US interest rates eased off for the third straight session. Yet Wall St managed a rally into the weekend, with the S&P staging its first up day in four days with gains of 0.31 percent. The DJIA rallied 0.27 percent and the Nasdaq 0.15 percent. Canadian data was more or less in line with forecasts, with headline CPI rising 0.4 percent m/m and 2.6 percent y/y in February.
Data Highlights
CA Feb. CPI out at +0.4% m/m, +2.6% y/y vs. 0.4%/2.7% expected and 0.4%/2.5% prior resp.
CA Feb. Core CPI out at +0.4% m/m, +2.3% y/y vs. 0.3%/2.2% expected and 0.2%/2.1% prior resp.
US Feb. New Home Sales out at -1.6% m/m vs. +1.3% expected and revised -5.4% prior
NZ Feb. Trade Balance out at +NZ$161 mln vs. +NZ$153 mln expected and revised –NZ$159 mln prior
Upcoming Economic Calendar Highlights
(All Times GMT)
SI Industrial Production (0500)
GE IFO Surveys (0800)
US Fed’s Plosser to speak (1100)
US Fed’s Bernanke to speak (1200)
US Chicago Fed Activity Index (1230)
US Pending Home Sales (1400)
US Dallas Fed Manufacturing Activity (1430)
Andrew Robinson,
SAXO BANK