Australian Dollar
Disappointing data from China over the weekend softened appetite for the Australian Dollar yesterday. A slowdown in industrial production from 5.9% to 5.4% and retail sales growth slipping from 11.1% to 10.2% once again sparked concerns over the health of the Chinese economy. Many still believe China is in for a ‘hard landing’, so even small dips in the data are often seen as being ominous.
The optimism sparked by a huge surge in iron ore prices last Monday seemed to be wearing off yesterday. Analysts believe that the current strength in the market is likely caused by speculators. This is becoming increasingly common in China’s financial sector, leading many to wonder if the commodity rally is really a recovery, or simply a temporary surge caused by funds eyeing a profit.
On a domestic front, yesterday’s figures for consumer credit card purchases in January saw a slight drop in spending. Credit Card Balances dropped from AU$52.1 billion to AU$50.9 billion, while Credit Card Purchases slowed from AU$27.6 billion to AU$21.9 billion, which could suggest weakening demand, spelling bad news for inflation.
Sterling
With no data out yesterday, Pound Sterling was putting on a mixed performance in anticipation of George Osborne’s Budget statement, starting on Wednesday. On the one hand, more cuts are good for the UK economy as they help reduce the deficit and create a more stable environment, but if the cuts are too severe they could sap the energy from the economy, making it harder to achieve sustainable growth.
The Pound was also affected by the news that President Obama is planning to come to the UK, with official sources suggesting he will urge the UK to vote against a ‘Brexit’ at the June referendum.
Euro
Correctional trading kept the Euro weak yesterday, with the common currency continuing to fall from the high reached after the ECB’s policy meeting last Thursday.
The Euro slowly recovered, boosted by the positive news that industrial production in the Eurozone greatly outperformed forecasts, accelerating at the best pace since 2009. Year-on-year (YoY) production grew 2.8% in January after the previous month’s -0.1% drop, beating expectations by 1.2%. Monthly production grew 2.1% following December’s -0.5% fall, outperforming forecasts by 0.4%.
US Dollar
With no economic data available yesterday, the US Dollar managed to trend bullishly ahead of the next Federal Reserve policy meeting. Weakness in the Euro helped to keep the ‘Greenback’ strong, as safe-haven investors bought the ‘Buck’ instead of the sliding common currency.
All eyes were once again on the Federal Reserve, who will announce their next monetary policy decision on Thursday. While markets are becoming increasingly hopeful that the Fed will continue its rate hiking cycle this year, very few economists or traders expect interest rates to go up at the next meeting. However, the press conference following the announcement could provide vital clues on the future actions of the Fed.
Canadian Dollar
Canadian consumer confidence has hit a 20-year low, according to recent survey results. The latest poll by EKOS Research has shown that Canadians are extremely conflicted over two very important issues; the economy and the environment. While 72% of those polled thought the government should take action to curb climate change, even if it meant hurting industry, 56% say the economy is a bigger concern to them than the environment at the present.
A drop in the price of oil took Brent Crude back down below US$40 per barrel mark, further weakening the ‘Loonie’.
New Zealand Dollar
According to the New Zealand Institute of Economic Research (NZIER), economists still expect strong growth, but inflation expectations have fallen. Growth and employment prospects have been revised up, according to the NZIER survey, which aggregates multiple forecasts. Unemployment is predicted to have fallen to 5.1% by 2019, with GDP anticipated to accelerate to 3% by 2018.
However, wage and inflation outlooks have been trimmed, with average hourly earnings growth for the private sector cut from 2.7% to 2.4% in 2016/17 and from 2.8% to 2.5% in 2017/18. The Consumer Price Index expectation has been slashed from the 1.9% forecast by the last survey in December to 1.6% in the 2016/17 period.
Data Released
March 15th NZD Dairy Auction Avg. Winning Price MT (MAR 15)
March 15th NZD Dairy Auction Whole Milk Powder MT (MAR 15)
March 15th 11:30 AUD RBA March Meeting Minutes
March 15th 21.00 EUR Eurozone Employment (YoY) (4Q)
March 15th 23.30 USD Advance Retail Sales (MoM) (FEB) -0.1%