- AUD Retail Sales miss their mark -0.5% vs. 0.5% eyed
- UK PMI Services continues string of weak UK data
- Nikkei closed Europe off -0.3% on open
- Oil sliding to $108/bbl
- Gold at $1512/oz.
- AUD Building Approvals m/m 9.1% vs 5.0%
- AUD Retail Sales m/m -0.5% vs. 0.5%
- NZD Employment Change q/q 6.7% vs. 6.6%
- UK PMI Services at 54.3 vs. 55.8
- EUR German Factory Orders m/m n/a
- EUR Minimum Bid Rate n/a
- GBP Asset Purchase Facility n/a
- GBP Official Bank Rate n/a
Event Risk on Tap
- CAD Building Permits m/m expected at 2.7%
- CAD Ivey PMI expected at 69.2
- USD Unemployment Claims expected at 419K
- USD Prelim Nonfarm Productivity q/q expected at 1.1%
- USD Prelim Unit Labor Costs q/q expected at 0.8%
- USD/JPY continues to drift lower at 80.00 comes into view
- AUD/USD slips to 1.0700 post weak Retail Sales
- GBP/USD drops below 1.6500 after PMI Services misses
- EUR/USD hovers near 1.4900 ahead of ECB
@import url(/css/cuteeditor.css); Risk FX currencies went their separate ways ahead of "Central Bank" Thursday as weak economic data offset rate hike expectations and created a rangebound session in early European trade. The EUR/USD was the best performer of the night as traders positioned themselves for the ECB press conference at 12:30 GMT hoping that Jean Claude Trichet would reaffirm his commitment to further tightening monetary policy over the next several months.
Meanwhile in Australia the Retail Sales data missed by a wide margin printing at -0.5% versus 0.5% eyed as the hit from the cyclone and the flooding in Queensland tempered consumer demand in Q1 of this year. As we wrote earlier," Much like their counterparts in Germany, Australian consumers are disregarding the increase in purchasing power that comes with surging currency and instead are becoming more cautious in the wake of greater economic uncertainty both at home and abroad.
Although the RBA has continuously stated that it will look through the "noise" of recent disturbances, today disappointing results are likely to keep the central bank on the sidelines well into Q2 of this year as monetary authorities look for signs of stabilization in consumer demand before considering further tightening." The Aussie therefore is likely to remain under pressure and could correct back to 1.0500 over the next week or so if risk aversion flows accelerate.
In UK the PMI Services report continued the string of disappointing economic results printing at 54.3 versus 55.8 eyed. Activity in the largest sector of the UK economy slowed sharply and was the third downside miss in the past five months. Last month's 57.1 print looks increasingly like a one off event spurred by some seasonal government spending and going forward UK growth appears to be slowing across all sectors making the case for a BOE rate hike any time in the near future highly unlikely.
Cable dropped through the 1.6500 level but remains relatively well bid given the dour economic results this week. Today's BOE actions are expected to produce no surprises, but it's becoming increasingly clear that the doves remain in control of the MPC and therefore the pound is vulnerable to further selloffs over the next several weeks especially if data continues to disappoint. For now the 1.6700 level looks like firm resistance while longer term support is unlikely to materialize before 1.6000
In North America the focus will be on ECB chief Jean Claude Trichet with the market looking for the key word "vigilant" as a signal that the central bank will proceed with further tightening in June or July. Given the elevated level of inflation Mr. Trichet is unlikely to back off his hawkish stance, but the ECB chief may introduce a more cautious note into his rhetoric and suggest that any further tightening if it were to occur would not take place until July at the earliest. With market primed for more rate hikes, such news could prove to be a disappointment and the pair could see some profit taking as the dya progresses.
|CAD||12:30||8:30||Building Permits m/m||2.7%||9.9%|
|USD||12:30||8:30||Prelim Nonfarm Productivity q/q||1.1%||2.6%|
|USD||12:30||8:30||Prelim Unit Labor Costs q/q||0.8%||-0.6%|