Top Stories
- AUD Inflation prints cooler assuring rate cut next week
- EUR claws back some losses as equities recover
- Nikkei off -0.78% Europe up 0.81%
- Oil at $103/bbl
- Gold at $1637/oz.
Overnight Eco
- AUD Consumer Prices Index (QoQ) (1Q) 2.2% vs. 2.6%
- NZD Credit Card Spending s.a. (MoM) (
MAR
) 5.2% vs. 4.0%
- CHF Trade Balance (Swiss franc) (
MAR
) 1.69B vs. 2.59B
- CHF UBS Consumption Indicator (
MAR
) 1.22 vs. 0.90
- GBP Public Sector Net Borrowing (Pounds) (
MAR
) 15.9 vs. 15.0
Event Risk on Tap
- USD Consumer Confidence (APR) expected at 70.1
- USD Richmond Fed Manufacturing Index (APR)
- USD New Home Sales (
MAR
) expected at 320K
- USD New Home Sales (MoM) (
MAR
) expected at 2.2%
- CAD Retail Sales (MoM) (FEB)
- CAD Retail Sales Less Autos (MoM) (FEB)
Price Action
- USD/JPY steady at 81.20
- AUD/USD tumbles to 1.0250 post weak CPI but recovers to
1.0300
- GBP/USD remains at 1.6150
- EUR/USD mildly bid to 1.3170 as equities recover
A very quiet lackluster night of trade in the currency market
with EUR/USD clawing back some of the losses from yesterday as
relatively good auctions in Spain and Italy along with recovery in
stocks helped risk appetite. Meanwhile Aussie was hurt by weaker
than expected inflation data that virtually assured a rate cut from
the RBA at the upcoming policy meeting next week.
Australian inflation printed markedly cooler than expectations
sending Aussie lower in Asian session trade. On a quarterly basis
Australian CPI came in at 0.1% versus 0.7% forecast while Trimmed
mean CPI was 0.3% versus 0.6% anticipated. On a yearly basis the
trimmed-mean inflation rate dropped to 2.2% from 2.6% and the
weighted-median rate fell to 2.1% from 2.5%.
The substantial reduction in the rate of inflation was driven by
lower food and travel costs while energy, education and
pharmaceutical costs continued to rise. Overall the sharp reduction
in the yearly rate of inflation of 40 basis points suggests that a
rate cut from the RBA is nearly assured at the next meeting in May.
Presently the market is pricing nearly 100bp in rate cuts from the
RBA by year end which would significantly reduce Aussie's interest
rate advantage in the G10 universe.
The AUD/USD fell to a session low of 1.0247 in morning Asian
trade but managed to stay above the yearly lows of 1.0225
rebounding to 1.0290 in early European dealing. For the time being
the market appears to have priced in the immediate 25bp rate cut
and the pair could rally towards the 1.0300 level if risk flows
turn positive for the rest of the day. However, the longer term
picture for Aussie remains quite negative as the pair continues to
lose its attraction on the carry trade basis with every new
reduction in the benchmark rate. A test of yearly lows at 1.0225
could open the way for a move towards parity over the intermediate
term horizon.
In Europe both the Spanish T-bill auction and the Italian
January 2014 CTZ auction went off relatively well with demand
exceeding the upper end of the range, but Spain had to pay
considerably more for its short term funding needs with 3 month
yields rising to .634% from .381% the period prior. The euro
remained slightly bid as equities rebounded by nearly 1% helping to
lift risk appetite, but overall price action was moribund with the
only piece of data coming from Industrial Orders which decline by
-1.4% confirming the weakness in manufacturing sector evident in
yesterday's PMIs.
In North America today the calendar carries Consumer confidence
data, and New Home Sales but perhaps the most interesting release
will be the Canadian Retail Sales data due at 12:30 GMT. Given the
sharp rise in wholesale sales chance are good that Canadian Retail
Sales will surprise to the upside which could prompt further
selloff in AUD/CAD. The pair has been in strong downtrend over the
past several months as Australia's fortunes have waned while
economic activity in Canada has been boosted by higher oil prices
and recovery in the US. Having made fresh year to date lows at
1.0155 earlier in the day AUD/CAD could target 1.0100 if Canadian
data beats forecasts.
FX Upcoming
| Currency |
GMT |
EST |
Release |
Expected |
Prior |
| USD |
14:00 |
10:00 |
Consumer Confidence (APR) |
70.1 |
70.2 |
| USD |
14:00 |
10:00 |
Richmond Fed Manufacturing Index (APR) |
|
7 |
| USD |
14:00 |
10:00 |
New Home Sales (
MAR
) |
320K |
313K |
| USD |
14:00 |
10:00 |
New Home Sales (MoM) (
MAR
) |
2.2% |
-1.6% |
| CAD |
12:30 |
8:30 |
Retail Sales (MoM) (FEB) |
|
0.5% |
| CAD |
12:30 |
8:30 |
Retail Sales Less Autos (MoM) (FEB) |
|
-0.5% |