Key Forex Afternoon Notes:
- UK BRC retail sales monitor y/y 0.2% vs. 0.2% previously
- Australia NAB business confidence 0 vs. 3 previously
- China CPI y/y 1.4% vs. 1%; PPI y/y -4.8% vs. -4.3%
- Japan Prelim machinery tools orders y/y 28.9% vs. 20.4% previously
- Switzerland unemployment rate 3.2% vs. 3.2%
- French industrial production m/m 0.4% vs. -0.2%
- Italy industrial production m/m -0.7% vs. 0.2%
- US NFIB small business optimism 98 vs. 99.2
Later
- BoE Governor Mark Carney speech
Markets continued to tread lightly as lack of any clear fundamentals left the major theme running as the US Dollar continued to chug along. This morning’s China inflation data managed to be positive rising above estimates, but the decline in the PPI year on year continues to remain a sore thumb for the Chinese economy. The current inflation pick up is however seen by many as a short term seasonal influence and that subsequent inflation data should continue to point to the downside.
The markets reacted little to the news, bfut the Aussie and Kiwi dollars remained subdue, or the most part. AUDUSD declined to lows of 0.7603 before managing to reverse for the day from the session lows while the NZDUSD remained a bit weaker trading near 0.73 at the time of writing.
The Japanese Yen saw intraday strength as most of the currencies declined. USDJPY was down to 121 levels after posting a session high to 121.89 and the same theme was felt across the board. NZDJPY continued to post losses since last week, currently trading at 88.3.
Into the European trading session, ECB’s QE was the major theme as the Euro continued to decline, briefly trading near 1.0742 levels before managing to stage a relief rally. But the currency remains very weak against the Greenback. Talks of bond purchased in countries like Germany, France and Netherlands sent bond yields plummeting lower, some even dropping by as much as 4bps. Given the QE bond purchases, a revival in the Euro seems off the cards for the moment and any rallies in the EURUSD will likely be seen as an opportunity to sell.
The British Sterling managed to fare somewhat better lifting off from intraday lows of 1.5043 but remains pressured to the downside. The major risk to the Sterling cross currencies comes from BoE Governor, Mark Carney’s speech later this evening. Any reference to monetary policy is likely to touch upon the medium term inflation expectations and the recently concluded monetary policy meeting. However, considering the May general elections, it is likely that the Governor would refrain from commenting too much about interest rates at this point in time.
The US trading session is also very light after the Wholesale inventories report showed a rise to 0.3%. The Greenback was little changed on the news. With no more news events on the table, the currency markets are likely to continue the trend for the day.
