China sees its first trade deficit with the U.S in over a year, as the markets consider the prospects of conflict with Syria, a more aggressive FED, a lingering threat of a trade war and softer economic stats out of key economies.
Earlier in the Day:
Economic data through the Asian session this morning included New Zealand’s March Business PMI, the release of the RBA’s Financial Stability Review and China’s March trade figures.
For the Kiwi Dollar, March’s business PMI slipped from 53.4 to 52.2.
The manufacturing sector saw the pace of growth slow in March, making it a 2nd consecutive fall in the PMI in the 1st quarter and a sizeable fall from last November’s 61.0
March’s fall was attributed to growth in production easing, with the production sub-index falling from 53.7 to 50.8.
Other falls were seen in the employment sub-index, down from 54.6 to 53.5 and new orders down 0.4 points to 53.8, while finished stocks and deliveries saw a pickup in growth at the end of the 1st quarter.
The Kiwi Dollar moved from $0.73779 to $0.73788 upon release of the figure, with the Kiwi Dollar in a holding pattern through the session, down 0.03% to $0.7374 at the time of writing.
For the Aussie Dollar, the RBA’s financial stability review focused more on household debt and the risks that rising interest rates could pose to domestic consumption and economic growth prospects.
The review served as a warning, with the RBA noting that recent economic growth and surge in asset prices have left investors failing to consider the possible implications of a correction, investors having taken on more risk in recent years, exposing themselves to more significant losses.
On the positive side, the RBA noted that household stress was not so widespread, though some households could be tested should there be a deterioration in labour market conditions.
The Aussie Dollar moved from $0.77668 to $0.77657 upon release, the content providing few surprises this morning, ahead of China’s trade figures.
Out of China, China’s USD $33.75bn trade surplus slid to a $4.98bn deficit in March, which was worse than a forecasted narrowing to a $27.21bn surplus.
Exports fell by 2.7%, weaker than a 10% rise following February’s 44.5% jump, while imports surged 14.4%, following February’s softer 6.3% increase.
The figures revealed a first trade deficit with the U.S since February of last year, with the softer numbers following some disappointing private sector PMI numbers out of China that will raise some concern over 1stquarter growth. The uptick in imports will provide some comfort and hopes of a rebound in April however, with the trade deficit coming at just the right time, as the U.S President begins to consider re-joining TPP talks.
The Aussie Dollar moved from $0.77728 to $0.77708 upon release of the figures, the Aussie Dollar a proxy for trade data out of China, before recovering to $0.7773 at the time of writing, up 0.25% for the session.
An easing of market fears of a U.S snap attack on Syria saw market risk appetite improve through the session, with the Japanese Yen down 0.04% to ¥107.37 against the U.S Dollar and the Asian equity markets following the U.S markets into positive territory this morning.
The Nikkei and ASX200 were up 0.51% and 0.43% respectively ahead of the close, while the Hang Seng and CSI300 were down 0.29% and 0.44% in a choppier day that saw both give up early gains, China’s trade deficit hitting the pair hard.
Trump’s talk of considering re-joining TPP trade deal talks was certainly an about turn from the announced tariffs on $150bn worth of Chinese exports into the U.S, a positive for the market, while there were lingering concerns over rising tension in the Middle East
The Day Ahead:
For the EUR, Economic data out of the Eurozone this morning includes finalized March inflation figures out of Germany and Spain, together with the Eurozone’s February trade balance.
With the finalized inflation numbers unlikely to have material impact on the EUR, following the ECB’s dovish minutes released on Thursday, weaker than expected trade figures would add some pressure on the EUR, though much will depend on market risk sentiment through the day, the U.S President shifting the market’s focus away from trade and over to a possible attack on Syria.
Any risk aversion will be considered a positive for the EUR and would overshadow any disappointing stats out of the Eurozone, Thursday’s slide in the EUR having come off the back of easing fears of the U.S going it alone on a missile attack on Syria.
At the time of writing, the EUR was up 0.02% to $1.2329, with plenty of factors for the markets to consider through the day.
For the Pound, it’s a quiet day on the data front, with no material stats scheduled for release this morning, the Pound having made it back to $1.42 levels on Thursday. Market sentiment continues to remain bullish for the Pound, with BoE MPC members talking up the need for a rate hike next to ease inflationary pressures in spite of a soft patch in the economy and continued concerns over Brexit.
At the time of writing, the Pound was up 0.04% to $1.4234, with $1.45 the next target for the bulls, though much will depend on the BoE and Brexit…
Across the Pond, economic data out of the U.S includes February’s JOLTs job openings and April prelim consumer sentiment figures.
Following the disappointing nonfarm payroll numbers released last week, we can expect the JOLTs job opening to provide direction, though with forecasts negative, the numbers will have to beat expectations to support the Dollar, with consumer sentiment also forecasted to be marginally softer. We will expect expectation and sentiment figures to have less of an influence, barring material deviation from forecast.
Outside of the data, trade and missile launch chatter from the Oval Office will also need to be considered, any risk aversion expected to weigh on the Dollar.
At the time of writing, the Dollar Spot Index was up 0.03% to 89.777, the U.S president continuing to get his wish for a weaker Dollar, much of the influence has been from the President himself.