Key Forex Afternoon Notes:
- China GDP y/y 7.3% vs. 7.2%; industrial production y/y 7.9% vs. 7.4%
- Germany PPI m/m -0.7% vs. -0.4%; PPI y/y -1.7% vs. -1.4%
- German ZEW Economic sentiment 48.4 vs. 40
- Eurozone ZEW Economic sentiment 22.4 vs. 13
- Canada manufacturing sales m/m -1.4% vs. -0.7%
Markets opened on a cautious note ahead of China’s GDP data but soon equity markets in Asia rallied as GDP for the year managed to beat estimates modestly, rising 7.3%. The Nikkei rallied as much as 2% ahead of the European session, while the Yen managed to weaken across the board with USDJPY testing the highs of 118. However, despite the consensus beating numbers, growth in China is starting to slow down as the numbers for 2014 were a lot weaker than 2013, where GDP grew 7.7%, in 2013.
The Australian dollar was however mixed, while the Kiwi Dollar was weaker during the Asian session. The weaker Yen and the stronger Nikkei saw the markets rallying ahead of tomorrow’s BoJ monetary policy, where inflation expectations are likely to be cut below forecasts to 1.5% – 1.7%. However, the BoJ could possibly surprise the markets.
Earlier, the IMF released its economic forecasts, which painted a gloomy picture. The IMF expects the world economy to grow by 3.5% in 2015 and 3.7% in 2015, down from 0.3 percent points from the IMF’s previous forecasts in October last year. For the US, the IMF revised the estimates to 3.6% for 2015, while China’s economy is expected to slow down to 6.8% in 2015 and 6.3% next year. The forecasts however did not weigh in much for the markets.
European session was quieter but steady. Economic sentiment from Germany continued to post optimistic numbers, with the ZEW sentiment rising to 48.4 along with the Eurozone economic sentiment rising to 22.4, beating estimates.
The markets continue to speculate on the size and scope of the ECB’s bond purchases announcement this Thursday. The EURUSD was relatively stable, trading within a tight range ahead of the US trading session while GBPUSD managed to rise from the lows trading during intraday highs at 1.515.
Gold futures also managed to stage an impressive rally, rising as much as 1% for the day making a new five-month high, trading at 1290 levels. The precious metal continues to remain elevated ahead of the QE announcement from Draghi.
There is not much of economic data scheduled from the US today as the US markets open after yesterday’s bank holiday.
Canada’s manufacturing sales for the month declined worse than expected falling -1.4% below estimates of -0.7%. The Bank of Canada will be holding its monthly monetary policy review tomorrow but is expected to leave interest rates unchanged while the markets await the BoC’s outlook on inflation and GDP numbers forecasts.
