In his semi-annual testimony before Parliament, RBA Governor Stevens said that monetary policy was right for the moment. He offered nothing different from the previous RBA statements and remained upbeat on the economy throughout. He noted that growth was close to trend and inflation is expected be close to target over the next 1-2 years. He noted different paces of growth within the economy, but stated the opinion that policy adjustment could not remove the forces generating those disparate growth paths. As such, it would appear that official rates may be on hold in the near future and, when commenting that he was not in favour of capping the AUD (Swiss style) and had not intervened as yet, he did not rule out such activity in the future. AUD traded with a generally firmer bias throughout the session but was trapped between a couple of supposed option expiry levels.
In a press briefing in Tokyo, Moody’s said it would not be taking any immediate action on Japan’s rating but warned that any slippage in meeting its fiscal targets could have wider implications. It also warned that there is a risk that Bank of Japan purchases of JGBs may remove the moral hazard from the government but it viewed this action as merely temporary. It did not foresee Japan’s current account balance sliding into deficit any time in the near future, and the trade deficit did not have any material impact on its rating. Moody’s has a Aa3 rating on Japan with a stable outlook, 3 notches below AAA. USDJPY oscillated around the 80.0 mark while EURJPY nestled up to the 200-day MA John mentioned yesterday.
GBP showed little reaction to more dovish comments from BOE’s Fisher who commented that the UK economic outlook remained “incredibly uncertain” though he was “slightly more comfortable” about the inflation outlook rather than the growth outlook. He added that he would have a “completely open mind going into the next round as to whether we would do more QE”.
Strong German IFO surveys were enough to propel the EUR to its highest levels of the year versus the dollar, eventually, with both the business conditions and expectations indices posting their fourth consecutive rise in February. The rally was not all one direction, however, with disappointing Euro-zone growth forecasts and talk of a Portuguese downgrade doing the rounds and forcing a slower rally. GBP recovered some of the ground lost after the BOE minutes on Wednesday, as latest CBI trends surveys showed improvement in total orders (-3 from -16) but tempered by lower selling prices (+10 from +13 as retailers forced to offer discounts to entice buyers). Oil prices continued to bubble as Middle East supply concerns increased.
The US weekly jobless claims consolidated the recent trend with a 351k print, unchanged from the previous week’s revised number but marginally below the consensus of 355k. Bloomberg’s weekly consumer comfort index improved further to -38.4 from -39.8 (highest since April 2008). US yields edged lower as the 7-year bond auction saw solid demand (bid/cover ratio up to 3.11 from 2.73 last time) and this helped cap USD/JPY’s recent rally through 80.0. Wall St posted small gains with the DJIA rising 0.36 percent, S&P 0.43 percent and the Nasdaq +0.81 percent.
Have a great weekend.
Data Highlights
US Initial Jobless Claims out at 351k vs. 355k expected and revised 351k prior
US Continuing Claims out at 3392k vs. 3455k expected and revised 3444k prior
US Bloomberg Consumer Comfort Index out at -38.4 vs. -39.8 prior
US Dec. House Price Index out at +0.7% m/m vs. 0.1% expected and revised 0.7% prior
US Feb. Kansas City Fed Manufacturing Index out at 13 vs. 9 expected and 7 prior
JP Jan. Corporate Service Price Index out at -0.2% y/y vs. 0.1% expected and +0.1% prior
China Jan. Conference Board Leading Index out at +1.6% m/m vs. +0.8% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
SI Industrial Production (0500)
GE Final Q4 GDP (0700)
EU ECB’s Weidmann to speak (0845)
EU ECB’s Nowotny to speak (0900)
UK Q4 GDP (0930)
UK Index of Services (0930)
CA BOC’s Carney to speak (1445)
US Final Michigan Confidence (1455)
US New Home Sales (1500
US Fed’s Williams to speak (1545
US Fed’s Bullard to speak (1635)
US Fed’s Plosser to speak (1830)
US Fed’s Dudley to speak (1830)
Andrew Robinson,
SAXO BANK