The U.S Dollar is the early mover this morning, with an uptick in 10-year Treasury yields providing support ahead of the U.S open. Economic data out of the Eurozone will provide some direction, while the RBA looks like its ready to ride out the year.
Earlier in the Day:
Economic data released through the Asian session this morning was limited to 4th quarter wholesale price inflation figures out of New Zealand, while the RBA meeting minutes from the 8th February policy meeting were also released.
For the Kiwi Dollar, there were continued signs of inflation pressure building, with the producer price index rising by 0.9% in the 4th quarter, quarter-on-quarter, which was better than a forecasted 0.3%, whilst just off the 3rd quarter’s 1.0%.
Following some disappointing 4th quarter consumer price figures, the latest numbers, coupled with the inflation expectations numbers released last week, will provide some support for the Kiwi Dollar. It may be too early for the markets to begin shifting on sentiment towards RBNZ monetary policy however, with the Kiwi Dollar’s rebound likely to be a concern, alongside some uncertainties in the economy.
The Kiwi Dollar showed little response to the figures, moving from $0.73719 to $0.73708 upon release of the data, before falling back to $0.7354 at the time of writing, a 0.24% drop for the morning.
For the Aussie Dollar, the RBA minutes also had a relatively muted effect, with the Aussie Dollar moving from $0.79131 to $0.79166 upon release.
Within the minutes, there was evidence of continued concern over wage growth that is needed to, not only drive inflation, but support households to begin to trim debt, the growth of which has outpaced wage growth in recent years.
Other concerns highlighted included household consumption, with the RBA noting that recent data suggested that weakness from the 3rd quarter had continued into the 4th, while there had been a pickup in retail sales in the 4th quarter.
Salient points from the minutes included:
- The Bank’s forecast for a modest rise in growth in consumption was predicated on a pickup in household income growth.
Growth in consumption could still turn out to be weaker than forecasted if household income growth were to increase less than expected.
- Consumption might be particularly sensitive to adverse developments in household income or wealth, in an environment of high household indebtedness.
- Business conditions had remained at a relatively high level in recent quarters, with prospects for private non-mining investment were more positive than they had been for some time.
- Export and import volumes had both increased in the September quarter, such that next exports had not contributed to growth. More recent data suggests that export volumes had declined in the 4th
- Labour market indicators had been significantly stronger through 2017, though there are expectations that spare capacity in the labour market would remain and members were uncertain how quickly it would erode.
At the time of writing, the Aussie Dollar was down 0.09% to $0.7906, giving up gains from the early part of the session, with a pickup in appetite for the U.S Dollar seeing the Japanese Yen down 0.19% to ¥106.79.
In the equity markets, the Nikkei and the ASX200 were down 1.04% and 0.14% respectively, while the Hang Seng reopened to a choppy session, up 0.08%, recovering from a 1.27% slide at the start of the day.
With the Dow and S&P500 mini futures in the red, there was certainly some caution this morning.
The Day Ahead:
Following a quiet start to the week, economic data out of the Eurozone this morning includes wholesale price inflation, together with consumer and business confidence figures out of Germany and economic sentiment numbers out of the Eurozone. Later in the day, the Eurozone’s Consumer Confidence flash figures will also be released, with the EUR expected to respond to today’s figures.
Based on forecasts, the numbers are on the softer side, which should limit any upward moves in the EUR, if the data is in line with or worse than forecasted, though much will also depend on the Dollar through the day.
At the time of writing, the EUR was down 0.19% to $1.2383, with today’s stats the key driver.
For the Pound, it’s another quiet day, with stats limited to this afternoon’s CBI Industrial Trend Orders, which are forecasted to be a negative, though we won’t expect the Pound to suffer too heavily from softer figures, with focus likely to be on tomorrow’s inflation report hearings.
The Pound was down 0.20% to $1.3972 at the time of writing, with sentiment towards the Dollar likely to dictate the direction of the pair through the day.
Across the Pond, there are no material stats out of the U.S to provide direction for the U.S Dollar, which has been on a tear this morning, up 0.32% to 89.388, as the markets prepare for the U.S markets to reopen after Monday’s holiday and U.S 10-year Treasury yields hit 2.9%, having eased back to 2.87% by Friday’s close.
For the Loonie, Wholesale December sales will be in focus this afternoon, though whether the Loonie can make up any ground against a U.S Dollar on the move remains to be seen, with wholesale sales forecasted to rise at a slower pace in December.
At the time of writing, the Loonie was down 0.15% to C$1.2580 against the U.S Dollar.