Capitol Hill and next week’s monetary policy decisions will be in focus through the day, with economic data out of the Eurozone and the U.S to provide some direction, as the markets continue to fret over members of the U.S administration who have left and those who may be on the way out.
Earlier in the Day:
It was a quiet day on the economic calendar this morning, with material stats released through the Asian session being limited to New Zealand’s February Business PMI figures and January’s finalized industrial production figures out of Japan.
For the Kiwi Dollar, there was more strife following the 4th quarter GDP numbers released on Thursday, with the Business PMI slipping from 55.6 to 53.4 in February, which reflected the 2nd slowest pace of expansion in the last 13-months.
According to the latest survey, a fall in new orders was a common theme among respondents, the sub-index falling from 55.4 to 54.1, with the production sub-index showing activity grow at a marginally slower pace, while the employment sub-index jumped from 52.8 to 54.8, suggesting that there is optimism amongst manufacturers in spite of the dip in new orders.
The Kiwi Dollar moved from $0.72787 to $0.78780 upon release of the figures, before falling further to $0.7246, down 0.44% for the day. With the RBNZ interest rate decision next week, the weak contribution from the manufacturing sector in the 4th quarter looks set to continue through the 1st quarter, which will be another reason for the RBNZ to sit back.
For the Japanese Yen, industrial production figures had little influence on the Yen, which was up 0.42% to ¥105.89 against the Dollar, as the markets begin to project the Yen crossing ¥100 against the Dollar. It may not take too long, particularly with uncertainty over trade lingering over the global economy and the talk of other key members of the U.S administration heading for the door.
January’s industrial production fell by 6.8%, which was softer than the prelim 6.6% fall, with the Yen moving from ¥105.899 to ¥105.863 against the Dollar upon release.
Elsewhere, the Aussie Dollar was down 0.03% to $0.7796, with some better stats out of the U.S providing some support for the U.S Dollar through the session.
In the equity markets, the Nikkei was down 0.45%, pressured by the bounce in the Yen, with the Hang Seng and CSI300 also in the red at the time of writing, while the ASX200 managed to buck the trend, following Thursday’s slide, ending the day with a 0.48% gain.
The Day Ahead:
After what’s been a relatively quiet week on the data front, economic data out of the Eurozone this morning includes finalized inflation figures out of Italy and for the Eurozone, together with the Eurozone’s 4th quarter wage growth numbers. While we will expect wage growth to influence, the pace of wage growth considered a precursor to inflation, the Eurozone’s inflation figures will be the area of focus. The EUR had softened on Wednesday, in response to Draghi’s dovish commentary, so any hints of a pickup in inflation and the EUR would certainly benefit, though the annual rate of core inflation would need to be revised upwards.
At the time of writing, the EUR was up 0.06% to $1.2312.
For the Pound, it’s another day with no material stats for the markets to consider ahead of next week’s BoE monetary policy decision.
The Brexit chatter continued through the week, with more optimism of a favourable deal having seen the Pound approach $1.40 levels, though how the final draft of the Brexit Treaty appears will ultimately decide the fate of the Pound and near-term monetary policy.
At the time of writing, the Pound was down 0.01% to $1.3935, with the Pound’s gains through the first half of March hitting speed bumps, as the market awaits updates on Brexit negotiations and of course, there is next week’s policy meeting to consider.
Across the Pond, it’s a busy day on the economic calendar, with key stats out of the U.S including February housing sector and industrial production numbers, with January’s JOLTs job openings and prelim consumer sentiment figures for March to also consider.
Key drivers will be sentiment and industrial production figures, while upbeat housing sector data would provide some support through the early part of the afternoon.
Capitol Hill will remain the main area of focus however, with the markets also beginning to consider next week’s FOMC meeting, the prospects of a rate hike and how FOMC members will project the rate path for the year.
At the time of writing, the Dollar Spot Index was down 0.08% to 90.068, with economic data and the Oval Office the key drivers through the day.
Across the border, economic data out of Canada includes January foreign security purchases and manufacturing sales figures.
While we will expect the stats to provide direction for the Loonie, skewed to the negative based on forecasts, any moves will likely be short lived, particularly if the numbers are better than forecasted.
At the time of writing, the Loonie was down 0.05% to C$1.3058 against the U.S Dollar as concerns over NAFTA continue to weigh.