Trump has been rattling the markets again and this time may be able to claim responsibility for the slide in risk appetite, with any signs of a trade war likely to material influence central bank policy near-term and the FX market.
Earlier in the Day:
Key macroeconomic data released through the Asian session this morning was on the lighter side, with data limited to January building approvals and 4th quarter company gross operating profits out of Australia and China’s February Caixin Services PMI.
For the Aussie Dollar, the stats were on the positive side this morning, with data released by the ABS.
Building approvals surging by 17.1%, following December’s downwardly revised 20.6% decline, which came in well ahead of forecasts. The jump in approvals was attributed to private sector dwellings excluding houses, which surged by 42.2%, while private sector house approvals fell by 1.1% in the month.
Company gross operating profits increased by 2.2% in the 4th quarter, coming in ahead of a forecasted 2% increase, following an upwardly revised 0.1% decline in the 3rd quarter, with wages and salaries rising by 1% in the quarter.
The Aussie Dollar moved from $0.77631 to $0.77544 upon release of the figures, with Aussie Dollar weakness coming off the back of rising concerns of a global trade war that could be sparked by Trump this week. At the time of writing, the Aussie Dollar slipped further back, down 0.15% to $0.7748.
Out of China, February’s Caixin services PMI disappointed, with the PMI falling from 54.7 to 54.2, below a forecasted 54.3.
Growth in the services sector remained close to January’s 68-month high, the softer numbers attributed to a slight fall in new orders, while sales was on the rise supporting a sustained pace of job creation and a continued improvement in business expectations.
Despite the fall in the services PMI, the composite PMI stood at 53.3, just shy of January’s 7-year high 53.7.
Concerns over a U.S trade war drove demand for the Yen, which was up 0.14% to ¥105.6 against the Dollar, with the Kiwi Dollar struggling, down 0.25% to $0.7218.
In the equity markets, the stronger Yen weighed on the Nikkei, which ended the day down 0.69%, with the ASX200 closing out the day down 0.57%. At the time of writing, the Hang Seng and CSI300 were also in the red, down 1.26% and 0.17% respectively.
The Day Ahead:
For the EUR, economic data scheduled for release this morning includes finalized February service sector PMI numbers and the Eurozone’s January retail sales figures.
While the EUR may find some direction from the data, focus will also be on Italy and the U.S, with the Italian General Election resulting in a hung parliament and what could be an extended period of uncertainty for Italian politics. The markets had generally anticipated the outcome, which saw the EUR avoid any immediate pressures, with some support coming from the SDP’s vote in favour of the Grand Coalition, giving Chancellor Merkel another term at the helm.
On top of the uncertainty over Italy, noise from the Oval Office this week will influence sentiment towards the Eurozone economy and appetite for the EUR, with Trump having talked of trade tariffs on European cars over the weekend.
At the time of writing, the EUR was up just 0.01% to $1.2318, with plenty for the markets to focus on this week, including Thursday’s ECB monetary policy decision and press conference.
For the Pound, economic data this morning is limited to February’s Services PMI, which is forecasted to be Sterling positive. While the Pound may find some upside should the figures be in line with or better than forecast, concerns over Brexit and the possible impact of a U.S trade war will likely be the key drivers. Following Theresa May’s speech on Brexit last week, Britain will be looking to improve trade relations elsewhere and a trade war is certainly something the British government and the economy can do without.
At the time of writing, the Pound was down 0.09% to $1.379.
Across the Pond, economic data includes finalized Markit Service PMI numbers for February, together with the market’s preferred ISM non-manufacturing PMI, which is forecasted to be on the softer side that could put some pressure on the Dollar this afternoon, though much will depend on the U.S administration and market sentiment towards a U.S trade war and how this would impact the economic outlook for the U.S.
At the time of writing, the Dollar Spot Index was up 0.05% to 89.983.