Key Notes:
- Japan retail sales y/y -9.7% vs. -7.4%
- Australia CB leading index m/m 0.5% vs. 0.4%
- UK Preliminary GDP Q1 0.3% vs. 0.5%
- UK Index of services 0.7% vs. 0.7%
Later:
- BoC Governor speech
- US S&P/CS HPI
- CB Consumer confidence
- Richmond manufacturing index
Currencies rally in a risk off trading sentiment.
The currency markets opened to a day of risk off appetite which saw a broadly weaker US Dollar giving rise to the commodity risk currencies such as the AUD, NZD and the CAD. The Asian session saw the release of retail sales numbers from Japan which fell -9.7% on a yearly basis, missing expectations of a -7.4% decline. The Yen was however trading mixed, weaker against most of the currencies with the exception of the US Dollar.
RBA Governor Glenn Stevens gave a speech but refrained from making any specific comments regarding monetary policy of the Australian dollar. The Aussie turned out to lead the markets making strong gains against the Greenback, testing the highs of 0.79 and higher. The Kiwi also reversed its previous losses to trading back near 0.77 handle.
The US Dollar saw a sharp sell off at the start of the European trading session with the Aussie and Kiwi building up on their gains. There was no major economic data from Europe today. UK’s GDP number missed estimates, printing 0.3% growth below estimates of 0.5%. The GDP growth also missed estimates on a yearly basis as well. While the British Pound initially reacted to the news, slumping into the release, the Pound managed to recover its losses as the currency rallied back to test the highs near 1.53, clearly ignoring the weaker GDP print.
The Euro was more subdued in its rally against the Greenback, with the pair flirting near 1.09 handle. In regards to the rally, the Euro saw a more gradual gain compared to its peers. With news that Greece reshuffled its bailout negotiating team, the Euro looked a bit supported fundamentally.
The US trading session will see the CB consumer confidence and the CS/S&P HPI data and Richmond Manufacturing Index. All of these combined could pose additional pressure on the US Dollar, should data miss estimates. To the upside, a better than expected print, is unlikely to recover much of the losses incurred by the US Dollar today.
At the time of writing, the US Dollar Index was trading near 96.42 handle.
The main risks come from the US GDP estimates for the first quarter tomorrow followed by the FOMC statement. Going by the current weakness, the markets are expecting to see a weaker GDP print alongside a dovish FOMC statement, posing a risk that any shift in the expectations could possibly upset the current risk off rally.
