Australian Dollar
The Australian Dollar was slumping yesterday, pushed lower by poor news from its major trading partner. Chinese trade data showed the first monthly deficit in three years, falling significantly further than the drop from US$51.4 billion to US$25.8 billion forecast to record a shortfall of -US$9.2 billion. This was due to an enormous 38.1% year-on-year surge in imports. Normally, signs of strong Chinese imports would be good news for the Australian economy, but investors were worried that these strong figures suggested the nation would be well-stocked and so need to import less over the coming months. As a result, the ‘Aussie’ slumped.
Chinese data this morning could cause more volatility, as the latest inflation figures are expected to show a slowdown in price growth.
Sterling
The Pound was on mixed form yesterday, but the AUD/GBP exchange rate slumped. Chancellor of the Exchequer Philip Hammond gave his first Spring Budget – also due to be his last, as it is being abolished. There were few surprises; forecasts for public spending, national debt and employment were all positive, but, while growth for the 2017-18 fiscal year was revised higher, the forecasts for the following three years were cut.
The RICS house price balance is due out today.
Euro
The Euro was largely on strong form yesterday, boosted by positive German data and intrigue ahead of today’s European Central Bank (ECB) monetary policy meeting. Industrial production recovered from a positively-revised -2.4% month-on-month decline to growth 2.8% in January; 0.2% above forecasts. On the year, production stagnated, but this was better than the -0.6% drop forecast. Investors were also keen to see if Mario Draghi and the Governing Council were forced to be a bit more upbeat following strong inflation data from Germany and the Eurozone. Rumours that the ECB would begin tapering its quantitative easing programme soon were reawakened.
US Dollar
Market hopes of an interest rate hike strengthened further after the US employment figures released very early this morning. February’s ADP employment change figure clocked in at a solid 298,000 against predictions of a fall from 246,000 to 200,000. Although there is no proven correlation, investors often take the ADP figure to be an indicator of how the vital US non-farm payrolls report will perform. Considering Janet Yellen said that employment and inflation needed to remain positive in order to justify a rate hike next week, indications the NFP could be set for a strong performance on Saturday morning removed one of the few remaining barriers to the Federal Reserve tightening monetary policy.
Initial and continuing jobless claims figures are set for release very early tomorrow morning; it is highly unlikely these figures could print poorly enough to shock the Fed into leaving interest rates frozen next week.
Canadian Dollar
Canadian domestic data was positive yesterday, although it was only against its commodity peers that the Canadian Dollar was able to make any gains. The number of housing starts clocked in over 10,000 above forecast at 210,200 in February, while January’s figures were revised higher to 208,900. Labour productivity in the final quarter of 2016 slowed from 1.2% to 0.4%, but this was expected, while building permits grew 5.2% month-on-month in January against predictions of 3%.
Canadian housing price data is set for release very early tomorrow morning.
New Zealand Dollar
The New Zealand Dollar was also hit by news of China’s trade deficit, as well as by surging bets of an interest rate hike in the US; the market was pricing-in odds of 90.8% of a rise in borrowing costs to 1.00%. The morning’s data had brought little support. The heavy truckometer for February showed a 2.3% rise in haulage activity, but manufacturing activity declined -1.8% quarter-on-quarter in the final three months of 2016. Manufacturing activity rose from 0.4% to 0.8% for the same period, but this wasn’t enough to support the ‘Kiwi’.
Data Released
March 9th 11.01 GBP RICS House Price Balance (FEB) 23%
March 9th 12.30 CNY Consumer Price Index (YoY) (FEB) 1.7%
March 9th 23.45 EUR European Central Bank Rate Decision (MAR 09) 0.00%
March 10th 00.30 CAD New Housing Price Index (YoY) (JAN)
March 10th 00.30 USD Initial Jobless Claims (MAR 04) 235k