With the Dollar on the back foot following Wednesday’s release of the FOMC economic projections, it’s over the Bank of England, which is expected to take a far more hawkish stance following this week’s wage growth figures.
Earlier in the Day:
Economic data released through the Asian session this morning was limited to Australia’s employment figures, as the markets continued to respond to the FED’s rate hike and release of the economic projections on Wednesday. Ahead of the employment figures, the RBNZ held rates unchanged at 1.75% in the early hours.
For the Kiwi Dollar, there were no surprises this morning, as the RBNZ held rates unchanged, Governor Grant Spencer finishing off his 6-month stint to make way for Adrian Orr. Expectations are for the RBNZ to remain in a holding pattern through this year and much of next, with economic data having been somewhat disappointing of late and inflation showing no signs of a pick-up.
The Kiwi Dollar moved from $0.72326 to $0.7235 upon release of the decision, before easing to $0.7233 at the time of writing, a gain of 0.07% for the day.
For the Aussie Dollar, the ABS reported an 18k increase in February employment, seasonally adjusted, with full-time employment rising by 64.9k, part-time employment fell by 47.4k.
Since February 2017, full-time employment has increased by 327.6k, while part-time employment has increased by just 93.1k.
The unemployment rate increased by 0.1% to 5.6%, the increase attributed to a rise in the participation rate, up to 65.7%.
The Aussie Dollar moved from $0.77808 to $0.77641 upon release of the figures, before falling to $0.7744 at the time of writing, down 0.27% for the morning.
Elsewhere, the Japanese Yen was up 0.22% to ¥105.82, off the back of a slide in risk appetite and a softer U.S Dollar, the markets now anticipating punitive tariffs on Chinese goods.
In the equity markets, the ASX200 closed out the day with a 0.22% loss, reversing Wednesday’s 0.23% gain, with the Hang Seng and CSI300 down 0.63% and 1.06% at the time of writing, weighed by talk of $30bn in trade tariffs on China. The Nikkei in contrast, bucked the trend through the session, up 0.54% at the time of writing, the jump in the Yen or fears of a trade war seemingly of little influence through the session, the upside coming off the back of the FOMC’s 3-rate hike projection for this year.
The Day Ahead:
It’s been quite a week for the EUR, with disappointing economic data released earlier in the week being of little influence as the FED hiked rates, but maintained its 3-rate hike projection for the year, delivering yet another shift in monetary policy divergence that had begun to favour the U.S Dollar.
Economic data scheduled for release this morning includes March’s prelim private sector PMI figures out of France, Germany and the Eurozone, together with the ECB’s economic bulletin and Germany’s Ifo Business Climate Index.
Focus will likely be on Germany’s manufacturing PMI and Eurozone services PMI, with recent weakness in industrial production and factory orders likely to be reflected in this morning’s numbers that could provide some downside for the EUR.
At the time of writing, the EUR was up 0.15% to $1.2356, the gains coming off the back of the market response to the FOMC’s economic projections.
For the Pound, it’s the main event of the week, with February’s retail sales figures a prelude to the BoE’s monetary policy decision. With retail sales forecasted to be a positive for the Pound, we will expect the Pound to be on the rise through the early part of the day. Market expectation of the BoE taking a particularly hawkish stance on policy and raise the prospects of a May rate hike the key driver, supported by the jump in wage growth and fall in the UK unemployment rate to 4.3% in January, according to figures released on Wednesday.
At the time of writing, the Pound was up 0.10% to $1.4155, a move through to $1.42 ahead of tomorrow’s EUR Summit in the hands of the BoE this afternoon.
Across the Pond, the FED delivered on its promise of a rate hike, though the doves continued to rule the roost, holding the rate hike projection for this year at 3, which ultimately left the Dollar back pedalling through to Wednesday’s close and the Asia session this morning.
For the day ahead, economic data out of the U.S this afternoon includes March’s prelim private sector PMI figures, together with the weekly jobless claims numbers.
While positive numbers will ease some of the Dollar’s pain, the devil will be in the details later today, with the markets likely to be focused on input and output price pressures across the private sector, the FED more than capable of upwardly revising its rate hike projections in the June meeting should economic indicators deliver.
At the time of writing, the Dollar Spot Index was down 0.26% to 89.553, with even stellar numbers later today unlikely to get the Dollar out of its current mood, if Trump delivers on his promise of trade war with China.