AUDUSD traded on the south side of 0.98 following a weak headline April Oz retail sales number that suggested the Ozzie consumer is becoming more cautious in light of the uncertain global situation.
While the 0.2 percent decline looked disastrous on a month-on-month comparison, a 0.2 percent upward revision to March’s data (now +1.1 percent versus 0.9 percent previously) helped take some of the sting out of the weaker data. Given the chance that Easter timing could skew the data, the 2-month average remains close to the average for the last year. However, the outlook remains murky with uncertain employment prospects, a shaky economy (ex-mining), fiscal belt-tightening and a gloomy external outlook the data set looks to get worse rather than better in coming months. AUDUSD traded softer in the aftermath with rates markets suggesting at least a 25bp cut at the next meeting with a 25 percent chance of 50bp (next RBA meeting June 5).
The weak Oz data had a knock-on effect for risk across other currencies and asset classes. EURUSD fell in tandem to print another new 2012 low (1.2458) while Asian bourses traded in the red throughout the session.
The first of the Asian manufacturing PMI releases was a bit of a non-event, with Japan’s May reading unchanged from March at 50.7. This was the sixth straight month above the key 50 contraction/expansion threshold and the 3-month average has now been unchanged at 50.8 for the past 3 months. However, the breakdown of the index was not so steady with the output component falling to a 5-month low (50.8) and new export orders declining to 48.2 from 48.5. The data put some pressure on the Nikkei but had little impact on currencies.
Spain was again responsible for a bout of renewed pressure on the EUR overnight with a very weak retail sales number (-9.8 percent y/y), rising bond yields and the uncertainty surrounding bank bailouts all combining to pull the EUR back from a mild rally to hit fresh 2012 lows. The single currency received minor support from a rumour circulating of an ECB press conference, possibly about a bank recapitalization plan, but this subsequently came to nothing. The low in EURUSD this time round was 1.2461.
The US data flow was mixed with S&P/CaseShiller house prices steady on a month-by-month basis (and falling at a slower pace on an annual basis) but consumer confidence readings were weak, falling to 64.9 in May from 69.2 previously. Manufacturing activity in the Dallas area echoed that seen in other Fed reports with a dip in May to -5.1 from -3.4 (an optimistic +3.0 was the consensus). Nevertheless, Wall St returned after the long weekend with a strong performance – DJIA up 1.01 percent, S&P +1.11 percent and the Nasdaq +1.18 percent. Facebook was among the most active counters but lost 9.6 percent.
Data Highlights
US Mar. S&P/CaseShiller House Prices out at +0.09% m/m vs. +0.2% expected and +0.15% prior
US May Consumer Confidence out at 64.9 vs. 69.6 expected and revised 68.7 prior
US May Dallas Fed Manufacturing Activity out at -5.1 vs. 3.0 expected and -3.4 prior
NZ Apr. Building Permits out at -7.2% m/m vs. -10.0% expected and revised +19.6% prior
JP May Markit/JMMA Manufacturing PMI out at 50.7, unchanged from prior
AU Apr. Retail Sales out at -0.2% m/m vs. +0.2% expected and revised +1.1% prior
AU Q1 Construction Work Done out at +5.5% q/q vs. 3.0% expected and revised -3.4% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Sweden C/a Balance (0730)
Sweden Q1 GDP (0730)
EU Euro-zone M3 Money Supply (0800)
Norway Manufacturing Wage Index (0800)
UK Consumer Credit (0830)
UK Mortgage Approvals (0830)
UK M4 Money Supply (0830)
EU Euro-zone Confidence Indicators (0900)
US MBA Mortgage Applications (1100)
CA Teranet/National Bank House Price Index (1300)
US Pending Home Sales (1400)
US Fed’s Fisher to speak (1720)
US Fed’s Dudley to speak (1730)
US Fed’s Rosengren to speak (2030)
Andrew Robinson,
SAXO BANK