Market Afternoon Report – Nov 25th

Market Key Notes

• PBOC cuts 14-day repo rate to 3.2%
• New Zealand inflation expectations eases to 2.1%
• German GDP rises 0.1% in Q3 2014
• BoE Inflation report hearing
• US revised GDP Q3 beats estimates, rising 3.9%
• Canada core retail sales m/m 0.0% vs. 0.4%; retail sales m/m 0.8% vs. 0.6% estimates

With the economic calendar packed with high impact news events right from the Asian session, the markets saw quite a bit of action across the board. The major news of the day from Asia was the 14-day repo rate cut by PBOC, China’s Central Bank. The move comes just a few days after the Chinese Central Bank cut its main lending rate. While the PBOC played down the latest move, markets are viewing the current actions by PBOC as a way to ease what seems like an inevitable hard landing for the Chinese economy which has been cooling down in the past months. While no further stimulus is expected, rate cuts are widely seen as the next imminent move by the PBOC. The Australian and Kiwi dollar managed to stage a rally on the news.

Bank of Japan’s monetary policy minutes was a non-event but comments from BoJ’s Kuroda that the Japanese central bank was watching the fx markets provides clues that the BoJ could expand its stimulus if need be. While the Yen crosses eased from their previous highs, the short term strength in the Yen is likely to fade. Shinzo Abe’s LDP party released its election manifesto and pledged fiscal stimulus to boost consumer spending if voted into power. Abe reiterated that he was looking for nothing less than a majority in the elections.

Germany’s GDP figures were released this morning showing that the economic powerhouse of Europe managed to stave off a recession, rising 0.1% in the 3rd quarter of 2014. While the data wasn’t much to cheer about, the fact that there were no surprises helped support the Euro which was relatively unchanged across the board.

The Bank of England Governor, Mark Carney was due to testify before the Treasury Select Committee today on the BoE’s inflation and economic outlook. The BoE had previously painted a very dovish picture for inflation outlook which saw the Sterling decline sharply across the board. However, the fact that the most recent BoE minutes showed 2 dissenters in support of a rate hike brought back uncertainty to the game. The inflation report hearing turned out to be a non event with the Sterling largely unchanged during the hearings.

Canada retail sales were mixed with the headline sales rising 0.8% beating estimates of 0.6% while core retail sales remained unchanged. Past month’s retail sales data was revised upwards showing a decline of -0.2% vs. -0.3% previously.

US revised third quarter GDP beat estimates rising 3.9%, above the first revision of 3.5% and above the estimates of 3.3%. The PCE q/q also beat estimates rising 2.2% on an annualized basis, while the GDP price index rose 1.4%. The bullish fundamental data was supportive of the Greenback with the USDJPY trading higher after making an intra-day low of 117.69. EURUSD and GBPUSD were relatively unchanged but trading lower for the day.