Asian equity markets were on the slide, with the Yen finding support off the back of a Dollar sell-off on Thursday, driven by concerns over a trade war. The main event of the day will be Theresa May’s speech that will influence the Pound today, as the markets on Sunday’s Italian General Election and the SDP Ballot result.
Earlier in the Day:
Economic data through the Asian session was on the lighter side this morning, with key stats through the session including New Zealand’s building consent figures for January, together with Japan’s January jobs / applications ratio and February core inflation figures out of Tokyo.
For the Kiwi Dollar, building consents increased by 0.2%, following December’s 9.6% tumble, with consents for houses only rising by 3.7%, following 5 months-in-a-row of declines according to stats NZ.
Year-on-year, new dwellings consented increased by 3.7%, with non-residential consents up 9.8% y/y.
The Kiwi Dollar moved from $0.72556 to $0.72469 upon release of the data, before bouncing to $0.7274 at the time of writing, a gain of 0.34%. In contrast, the Aussie Dollar was flat against the Greenback at $0.7756, with the talk of tariffs certainly a negative.
For the Japanese Yen, the data was mixed, with the jobs to applications ratio falling from 1.60 to 1.59, while Tokyo’s February core consumer prices rose by 0.9%, which was better than a forecasted 0.8%, following January’s 0.7% increase.
The Yen moved from ¥106.131 to ¥106.154 against the Dollar upon release of the figures, before reversing intraday losses through the session, with the Yen up 0.2% to ¥106.03 against the U.S Dollar at the time of writing, the uptick in inflation and risk off sentiment through the session driving demand, much of which stemmed from rising concerns of a trade war following President Trump’s statement on trade tariffs for aluminium and steel.
President Trump comments saw the U.S equity markets reverse on Thursday, leading the Asian markets into the red this morning.
The Nikkei was down 2.22%, with a stronger Yen and the U.S President’s focus on trade terms with Japan hitting Japanese stocks, with the Hang Seng and ASX200 down 1.53% and 0.66% respectively, while the CSI300 was down a more moderate 0.41% through the session, recovering from an intraday low 4,006.94.
We had seen the U.S markets recover from the Powell slide through the session on Thursday and, while Trump may have managed to put pressure on the Dollar, the equity market sell-off was not a complete surprise, with the equity markets having shown its teeth to such chatter earlier in the Trump presidency.
The Day Ahead:
For the EUR, economic data through the morning is on the lighter side, limited to German retail sales and Spanish unemployment figures. We will expect the EUR to respond to the data this morning, with German retail sales likely to have the greatest impact through the early part of the day.
Outside of the data, the markets will also be looking ahead to Sunday’s Italian General Election and Germany’s SDP Ballot result, with certain outcome combinations considered to be quite negative for the EUR.
For the Eurozone and the EUR, the worst possible result would certainly be a Five Star Movement – Lega Nord coalition in Italy, coupled with a ballot result that doesn’t support the terms of the grand coalition. A populist party in Italy and an end to Chancellor Merkel’s reign at the top would test the Establishment’s resolve, Merkel having been a key figurehead in EU politics in recent years.
At the time of writing, the EUR was up 0.11% to $1.2281, with plenty for the markets to consider going into the weekend. For now, news is that the grand coalition has about 60% support, which would be enough for Merkel.
For the Pound, economic data this morning is limited to February’s construction PMI, which could provide further support to the Pound, if in line with or better than forecast, following yesterday’s manufacturing PMI numbers that continued to show the sector holding its ground midway through the 1st quarter.
While the Pound may show some interest to the data, focus will be on British Prime Minister Theresa May’s speech today, with May expected to unveil her vision of Britain’s exit road, with BoE governor Carney also scheduled to speak.
For the British PM, it’s going to be more about the EU’s response than May’s delivery, though a united Tory Party would provide the Pound with some much needed support.
At the time of writing, the Pound was up 0.06% to $1.3784, with yesterday and this morning’s gains coming off the back of a Dollar sell-off than a shift in sentiment towards the Pound.
Across the Pond, stats out of the U.S are limited to finalized consumer sentiment figures that are unlikely to have a material impact on the U.S Dollar, with focus likely to be on Capitol Hill to see whether the U.S President will provide further clarity on his trade intentions.
At the time of writing, the Dollar Spot Index was down 0.15% to 90.187, as the U.S administration distracts the markets from inflation and monetary policy.
Across the border, economic data out of Canada includes 4th quarter and December GDP figures, which will influence the Loonie, though with December growth forecasted to grow at a slower pace than in November, the Loonie may struggle for direction following release.
The Loonie was up 0.03% to C$1.2833 against the U.S Dollar at the time of writing, with a pullback in crude oil prices and the latest trade tariff news likely to raise some concerns over trade terms with the U.S.