BoC to set the tone for the Loonie later today, with inflation figures out of the Eurozone and the UK to also give some guidance on where the respective central banks are heading in the coming months.
Earlier in the Day:
Following a busy session on Tuesday, economic data released through the Asian session this morning was on the lighter side, with key stats limited to March trade figures out of Japan.
Japan’s trade surplus widened from ¥3bn to ¥797bn in March, the widening coming from a slump in imports rather than any impressive export numbers.
Exports rose by just 2.1% in March, falling well short of a forecasted 4.7%, improving on February’s 1.8% increase, while imports fell by 0.6%, short of a forecasted 5.4% increase, leading to the widening in the surplus, with Yen strength playing its part.
Exports to China was on the rise year-on-year, outpacing the increase in exports to the U.S, the jump in exports to China in stark contrast to a 17% fall in imports from China, the decline attributed to the timing of Chinese New Year.
The softer export numbers will raise further concerns over the current soft patch being seen in key economies, though how much influence the Chinese New Year has had on recent stats out of Asia will become evident in April’s figures.
The Japanese Yen moved from ¥107.061 to ¥107.015 against the U.S Dollar upon release of the figures, before easing to $107.36 at the time of writing, down 0.34% for the session.
Elsewhere, the Aussie Dollar was up 0.06% to $0.7771, looking to reverse Tuesday’s 0.23% slide that came in response to a dovish set of minutes from the RBA and some poor stats out of China, while global dairy trade figures released late in the afternoon on Tuesday failed to spur a Kiwi Dollar rally, the Kiwi Dollar down 0.07% to $0.7337 at the time of writing, with forecasts for tomorrow’s 1st quarter inflation figures likely to be pining back the Kiwi through the morning.
In the equity markets, things were looking significantly better, with the Nikkei up 1.57% going into the close, with the ASX200 rising by 0.29% to make it a 4th consecutive day of gains. At the time of writing, the CSI300 recovered from early losses, up 0.46%, with the Hang Seng making up some lost ground, up 0.88%.
The Day Ahead:
For the EUR, economic data out of the Eurozone is limited to finalized March inflation figures that should provide some direction for the EUR, sentiment towards inflation having deteriorated following Draghi’s negative outlook last month.
Tuesday’s stats were disappointing and provided further evidence of a 1st quarter slowdown in the Eurozone economy that could linger going into the 2nd quarter, with some talk of indicators pointing to more than just a soft patch likely to be another factor for the markets to consider.
How the ECB will respond to an uptick in inflation and softer economic data remains to be seen, but following the last set of minutes, the ECB’s unlikely to be getting too hawkish until the numbers turn around and any threat of a trade war is eliminated.
At the time of writing, the EUR was up 0.08% to $1.238, with a lack of economic data out of the U.S leaving the EUR in the hands of today’s inflation figures and market risk appetite, Trump more than capable of giving the markets something to fret over.
For the Pound, it’s another big day on the economic data front, with March inflation figures scheduled for release.
Tuesday’s employment numbers were less than impressive, ultimately weighing on the Pound, with February wage growth falling short of expectations and March claimant counts on the rise that could reverse the February fall in the unemployment rate next month.
Any pickup in the rate of inflation and the Pound could see a bounce back, with the Pound managing to recover to $1.43 levels through the Asian session, up 0.16% to $1.4311 at the time of writing, with the markets yet to get any fresh news from Brussels on Britain’s Brexit deal.
Across the Pond, there are no material stats scheduled for release, which leaves the Dollar in the hands of FOMC voting member Dudley and the Oval Office through the day, the markets having plenty to consider, including monetary policy, the U.S economy, investigations into the U.S administration, Trump in the Middle East, a possible trade war with China and now there’s also Russia to consider.
At the time of writing, the Dollar Spot Index was flat at 89.516, with Dollar strength hard to bet on when the U.S President is so keen to sink it.
Across the border, the Bank of Canada will be delivering its April interest rate decision. While the general consensus is that the BoC will hold this month, how the BoC delivers its outlook on policy in the coming months will be of greater influence, the markets having been particularly dovish on the BoC in recent months.
At the time of writing, the Loonie was down 0.13% to C$1.2567, direction through the early part of the day suggesting that the market is betting on a dovish rate statement and monetary policy report. Until NAFTA talks have been concluded and the BoC knows exactly where Canada sits vis-à-vis trade with the U.S, there’s unlikely to be much intent on the policy side, which is in stark contrast to the hawkish FED. There could be a surprise however, when considering the latest business survey and labour market numbers, but to be more hawkish than the FED will be unlikely and that should be a negative for the Loonie later today.