BoE leaves policy unchanged. Australia jobs beat estimates

Jan 14 2016, 1:37 pm

Today’s Economic Events

  • Japan core Machinery orders m/m -14.40% vs. -7.30%
  • Japan PPI y/y -3.40% vs. -0.40%
  • Australia employment change -1.0k vs. -11.0k
  • Australian unemployment rate 5.80% vs. 5.90%
  • Japan prelim machine tool orders y/y -0.50% vs. 0.30%
  • German WPI m/m -0.80% vs. 0.10%
  • Italy industrial production m/m -0.50% vs. 0.30%
  • BoE votes to keep rates unchanged at 0.50%
  • ECB Monetary policy meeting minutes released
  • Canada NHPI m/m 0.20% vs. 0.20%
  • US Weekly unemployment claims 284k vs. 275k
  • FOMC’s Bullard Speech
  • US Import prices m/m -1.20% vs. -1.40%

Coming Up

  • The US 30yr Bond auction
  • New Zealand FPI

The markets continue to tread cautiously after a short-lived optimism yesterday where eventually another bout of risk aversion saw the flight to safety. The Asian markets closed today on a mixed note which saw the Shanghai Index rally 1.96% while the Nikkei225 fell -2.68% after news hit the wires of terrorist attacks in Jakarta, Indonesia. Data from the Asian session included Japan’s core machinery goods orders which declined -14.40% for the month against expectations of -7.30% declines. Producer prices index was also weak, falling -3.40% against expectations of -0.40% for the month. The Yen remained mixed, however, trading stronger against most of its peers. USDJPY is up 0.10% for the day, trading at 117.8 and within yesterday’s range.

The big event from the Asian session was the Australian unemployment data which surprised with -1k in net jobs against expectations of -10k. The unemployment rate remained unchanged at 5.8% while the previous month’s jobs numbers were seen to be revised higher. Despite an upbeat employment data, the Australian dollar was unimpressed as the AUD remained weak across the board. For the day, the AUDUSD is flat after posting an initial intraday high to 0.696. The NZDUSD is weaker today, down -0.89% for the day with prices touching a low of 0.641.

The European trading session saw the release of Germany wholesale price index which declined -0.80% for the month. The ECB’s meeting minutes released showed that some ECB members expected a 20bps rate cut on the deposit rate in order to strengthen the impact of the ECB’s monetary policy measures. The ECB, however, ended up cutting rates by only 10bps to -0.30%. The Euro slipped on the ECB’s minutes, with EURUSD trading at1.089, or about 0.13% higher for the day.

The Bank of England’s monetary policy saw interest rates being unchanged matching market expectations. Although the Pound Sterling initially reacted positively, prices were relatively unchanged as GBPUSD remains well below the 1.444 handle.

The BoE’s minutes showed that  Brexit remains a dent to the Sterling and that a potentially lower exchange rate could help support the case for a rate rise.

The BoE noted that domestic spending and investment remained healthy but noted that productivity growth remained weaker than expected. On wages, the BoE was of the opinion that low inflation was starting to see the effects feed into the wages as well which have failed to rise as expected. The BoE forecasted 2015 Q4 GDP to be at 0.50% and is likely to remain at 0.50% in Q1 of 2016, down from its previous GDP expectations.

The European equity markets remained in the Red, with the German DAX down -2.42% for the day while the London FTSE100 is down -1.58% for the day.

The NY session kicked off with the Canada NHPI data, which managed to meet estimates, rising 0.20% for the month. The Canadian dollar has been quite a week in recent days with USDCAD continuing to post new multi-year highs. USDCAD is currently up 0.07% for the day trading at 1.435. US data included the weekly unemployment claims which rose 284k above estimates of 275k while US import prices fell -1.20%, less than the expected -1.40%.

On the commodity front, Crude Oil prices touched down to a 12-yr low in the overnight trading session at $29.73 as the US EIA weekly inventories report showed a better than expected build up in commercial Crude Oil stockpiles. WTI is now trading at $30.81, up 0.88% for the day. Gold prices are down today, -0.67% trading at $1086 an ounce after a brief surge in trading yesterday which saw Gold rally back to $1095 an ounce before declining lower.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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