The selling of the commodity currencies, the Jpy and the metals were the main features of Friday’s trade in what was otherwise a rather choppy but sideways session. Stocks rose by around 0.5%, while the US$ was generally firm, which came about despite some soft US data, in which the ISM manufacturing index fell to 54.2 in February from 56.6 the previous month. The prices paid index, a measure of inflation, also fell, to 49.4, the weakest since February 2016.
The Aud$ was unable to make any ground from a better than expected Chinese Mfg PMI and closed the week towards recent lows as traders look towards the prospect of declining economic growth, and comes ahead of the RBA Interest Rate Decision/Statement on Tuesday. Gold and Silver declined in what I suspect was chiefly profit taking from a market that had got itself rather long of both, and came as a reaction to the softer than expected ISM manufacturing and consumer-sentiment readings. WTI was also lower, by around 2.3% in a belated reaction to Thursday’s announcement by the US Energy Department that it was offering up to 6 million barrels of emergency stocks from the Strategic Petroleum Reserve.
Elsewhere in the FX space, the other interest was in selling the Jpy, which continued the dollar’s move higher that had begun midweek. The EU majors were choppy but ended near their session lows against the dollar without causing any real excitement. Note that the DXY closed the week at 96.44, sitting right on the 100 DMA, while US yields were firm after having broken above downtrend resistance and also finishing at the 100 DMA (10Y @2.758%).
The coming week will be another busy one, with key features being Interest Rate Decisions to come from the RBA (Tue), BOC (Wed) and the ECB (Thur) and then, on Friday, the US employment data. The RBA are likely to sit on their hands again and do nothing, while the ECB will probably focus on EU macro forecasts and their implications for monetary policy, but will leave rates unchanged. Any new macro projections from the ECB are likely to show a substantial cut in the growth forecast for 2019/20 while the inflation forecasts are also likely to be revised down. Overall it is unlikely to be a Euro-positive affair.
The BOC are in a similar position to the RBA’s recent stance – until they changed to a neutral stance a couple of weeks ago. The BOC are stubbornly ignoring the data and still maintaining that it will hike rates later in the year although following Friday’s Q4 GDP, which came in at +0.4% q/q vs +1.0% expected, this week’s interest rate decision (March 6) may force them to take some action and cut rates. Probably not, but a possibility. If they do cut, expect the Aud$ to react badly, in sympathy with a lower Cad$.
Before then, the week gets off to a busy start today with the Australian Job Ads, TD Inflation and Building Permits, while the New Home Sales may also produce some volatility for the Aud$. Later on the EU Sentix Investor Confidence Survey will be the main feature for Europe ahead of some secondary US data, with the ISM Business Conditions being the main focus.
Other highlights during the week will be the Australian Current Account, German Retail Sales and EU/US Composite/Services PMIs (Tue), the Australian, Q4 GDP, Trade Balance, China PPI and US ADP Jobs data(Wed), the Australian Retail Sales and EU Q4 GDP (Thur), and then the China Trade Balance (Fri). Have a good week.
Economic data highlights will include:
Mon: NZ Commodity Price Index, Australian ANZ Job Ads, TD Inflation, Building Permits, New Home Sales , EU Sentix Investor Confidence Survey, UK Construction PMI, EU PPI, US ISM Business Conditions, Construction Spending
Tue: Australian Current Account, RBA Interest Rate Decision, German Retail Sales, EU/US Composite/Services PMIs, EU Retail Sales, US New Home Sales (Dec), ISM Non-Mfg PMI, API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index
Wed: Australian AIG Performance of Construction Index, Q4 GDP, Trade Balance, China PPI, US ADP Jobs data, Goods Trade Balance, Trade Balance (Dec), Factory Orders, New Home Sales (Jan), EIA Crude Oil Stocks Weekly Change
Thur: Australian Retail Sales, China Foreign Exchange Reserves, Japan Leading Economic Index, EU Q4 GDP, ECB Meeting/Interest Rate Decision, US Trade Balance (Jan), Consumer Credit Change
Fri: NZ Q4 Manufacturing Sales, Japan Eco Watchers Survey, Current Account, Trade Balance, China Trade Balance, UK Consumer Inflation Expectation, NIESR GDP Estimate, US Jobs/NFP/Average Hourly Earnings data, Wholesale Inventories.
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