The Dollar and the equity markets slipped into the red this morning, as fears of an escalation to the recent tariffs weighed on investor sentiment, Trump certainly capable of not only unraveling the financial markets, but also the U.S economy.
Earlier in the Day:
Economic data released through the Asian session this morning was limited to Australia’s AIG Manufacturing Index, which saw the largest pickup in activity on record in March. The manufacturing index rose from 57.5 to 63.1 in March, more than reversing February’s fall, while moving well ahead of the previous May 2002 62.1 record.
Employment, deliveries and new orders saw growth rates at record levels, with signs of rising margin pressures and wage growth also reflected within the survey responses.
The employment sub-index jumped 2.2 pints to 60.0, sitting well above the 12-month average 54.7, with new orders surging by 11.2 to 66.6, above the 12-month average 59.0, with average wages up 6.6 points to 63.4, also well above the 12-month average 59.9.
The Aussie Dollar moved from $0.76585 to $0.76565, with the markets more focused on the RBA statement due out later in the morning, holding back any upside in response to the impressive numbers.
With the markets returning after the Easter weekend, the RBA interest rate decision and the rate statement was the main event of the session. The RBA held rates unchanged at 1.5% as had been widely expected, with the rate statement providing the markets with few surprises, salient points from the statement being as follows:
- Employment has grown strongly in the last 12-months, with further employment rises expected, while wage growth continues to lag and will likely continue to do so for some time.
- Inflation remains low, with both CPI and underlying inflation running a little below 2% and is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing.
- An appreciation in the Aussie Dollar would be expected to lead to a slower pickup in economic activity and inflation than currently forecasted.
- Housing markets in Sydney and Melbourne have slowed, with additional supply expected to impact, while tighter credit standards have contained a further build-up of risk in house balance sheets, while household debt remains high.
- The low level of interest rates is continuing to support the economy, with further progress in reducing unemployment and having inflation returning to target being expected.
- The Australian economy grew by 2.4% in 2017 and the RBA expects growth to pick-up in 2018, supported by positive business conditions and increasing non-mining business and infrastructure investment.
- Uncertainty over the outlook for household consumption remains an issue, with household income growing slowly, while debt levels are on the higher side.
The Aussie Dollar moved from $0.76892 to $0.76878 upon release of the statement, with the relatively upbeat sentiment towards the economic outlook providing some support, in spite of the RBA giving little away on its outlook towards policy.
At the time of writing, the Aussie Dollar was up 0.27% to $0.7684, with the market panic of an escalation of trade noise doing little to pin back the morning moves.
Elsewhere, the Japanese Yen was down 0.04% to ¥105.93 against the U.S Dollar, with China’s response to the U.S trade tariffs having limited impact, while the equity markets struggled through the session, as the tech stock sell-off resumed.
The ASX200 was down 0.13% at the time of writing, with the Nikkei down 0.46% ahead of the close, pressured by the stronger Yen and tech sell-off, with fears of more trade tariffs later in the week weighing on the CSI300 and Hang Seng, the two down 0.83% and 0.61% respectively.
The Day Ahead:
For the EUR, it’s a busy day ahead on the data front, following Monday’s holiday, with key stats through the day including finalized March manufacturing PMI numbers and Germany’s February retail sales figures
At the time of writing, the EUR was up 0.02% to $1.2305, with today’s moves not just dependent upon this morning’s data, but also trade chatter and market risk appetite.
Across Le Manche, economic data out of the UK is limited to this morning’s March manufacturing PMI, which will certainly provide direction for the Pound. Any uptick in wholesale prices and improvement in new orders will be key to the influence of the figures to the Pound, with the headline number forecasted to be Pound negative.
The inflation obsession that has gripped the U.S markets, will be felt in the UK markets in the coming weeks, with the BoE expected to lift rates next month, assuming there are no Brexit curveballs from Brussels and no economic meltdown in the UK or globally for that matter. A trade war capable of delivering both.
At the time of writing, the Pound was up 0.09% to $1.4056, with today’s PMI and Brexit chatter the key drivers.
Across the Pond, there are no material stats for the markets to consider, following some disappointing manufacturing PMI numbers rolled out on Monday, leaving the Dollar in the hands of FOMC voting members Kashkari and Brainard, with the Oval Office ever present to sink the Dollar in the event of any hawkish FOMC commentary.
Focus remains on trade, with China’s moves on the weekend expected to draw a response from the U.S administration this week.
At the time of writing, the Dollar Spot Index was down 0.07% to 89.991.