China’s Premier Xi restores confidence in the financial markets this morning, supporting riskier assets and commodity currencies, with Trump likely to respond later in the day to provide further direction.
Earlier in the Day:
Economic data released through the Asian session this morning was on the lighter side, limited to business confidence figures out of New Zealand and Australia.
For the Kiwi Dollar, the quarter NZIER Business Confidence survey showed that a net 9% of businesses expect economic conditions to deteriorate in the coming months, improving marginally on the net 11% that had expected business conditions to deteriorate in the 1st quarter. The pessimism towards the economy was in contrast to expectations about demand in their own business, where a net 15% of businesses nationwide reported a lift in demand for their own business in the 1st quarter.
Weak profitability was reported to be the key driver for the continued pessimism, with rising cost pressures weighing on margins, labour costs on the rise as a result of material labour shortages.
The Kiwi Dollar moved from $0.73079 to $0.73057 upon release of the data before rallying to $0.7328 at the time of writing, a 0.3% gain for the session.
For the Aussie Dollar, Business Confidence deteriorated in March, with the NAB Business Confidence index falling by 2 points to +7, to sit just 1 point above the historical average of +6.
According to the NAB, leading indicators in the survey softened in March, with forward orders and capacity utilization on the decline, while holding at multiple year highs, conditions reported to be strongest in mining. Retailers continued to underperform, while confidence hit a 9-month high, with final product price inflation falling in the sector.
The Aussie Dollar moved from 0.77075 to $0.77073 upon release of the figures, the numbers continuing to support solid economic growth in the coming quarters, with an anticipated solid pace of hiring supporting a more optimistic outlook on wage growth down the road. At the time of writing, the Aussie Dollar was up 0.42% to $0.7729, the gains in the both the Aussie Dollar and Kiwi Dollar coming off the back of China President Xi’s speech this morning.
President Xi said in a scheduled speech this morning that he would cut tariffs on autos imported into China and continue to open the markets, further easing fears of a possible trade war between the U.S and China, with Xi also adding that there would be respect of foreign companies’ intellectual property.
Upbeat sentiment through the Asian session saw the Japanese Yen fall by 0.31% to ¥107.10 against the U.S Dollar.
The Asian equity markets were also on the move, the Hang Seng leading the way at the time of writing, up 1.14%, with the ASX200 and Nikkei up 0.74% and 0.66% respectively ahead of the close, the CSI300 gaining 0.69%.
The Day Ahead:
For the EUR, there are no material stats scheduled for release out of the Eurozone this morning, leaving the EUR in the hands of market risk appetite and sentiment towards ECB monetary policy ahead of Thursday’s release of the ECB policy meeting minutes.
Improved risk sentiment, off the back of China Premier Xi’s speech this morning will have eased flows into the EUR and, with baseline inflation numbers having failed to move, according to prelim figures last week, a pullback in the EUR could be on the cards should there not be a risk off event later in the day.
At the time of writing, the EUR was down 0.05% to $1.2315, with Trump’s response to China Premier XI’s speech this morning likely to be the key driver for the day.
For the Pound, there are no material stats scheduled for release, leaving the Pound in the hands of MPC member Haldane scheduled to speak later this morning.
With all of the noise over a possible trade war, market attention had been diverted away from BoE monetary policy. Any hawkish commentary from Haldane will likely to reignite expectations of a May rate hike, in spite of the softer service and construction PMI figures released last week.
At the time of writing, the Pound was up 0.03% to $1.4135, with $1.42 levels in sight should market risk sentiment continue to improve.
For the U.S Dollar, economic data is on the heavier side, with March’s wholesale price inflation figures scheduled for release, together with the Redbook, wholesale inventory numbers and the WASDE Report later in the day.
Any signs of a pickup in inflationary pressures and we can expect the Dollar to respond, assuming that there’s no negative trade chatter from the Oval Office, with any positive comments from the U.S President likely to provide some support for the Dollar.
Outside of the stats, FOMC voting member Kaplan is also scheduled to speak, with influence likely to be limited barring particularly hawkish chatter as the markets look ahead to the inflation figures and FOMC meeting minutes due out tomorrow.
At the time of writing, the Dollar Spot Index was up 0.06% to 89.896.
Across the border, stats out of Canada include March’s housing start numbers, together with February building permit figures, which will provide some direction for the Loonie that has been on a tear of late as sentiment continues to improve over NAFTA talks and the market gets hawkish on a BoC hike, following the release of the BoC Business Outlook Survey on Monday.
At the time of writing, the Loonie was up 0.07% to C$1.2688, the Loonie finding additional support from a bounce in crude oil prices and improved market risk appetite through the early part of the day.