The markets could be revising their outlook on U.S rates by the end of the day should core inflation hit 2.1% and the FED deliver a more hawkish than expected set of minutes, while data out of the UK could support a BoE move next month. With Draghi scheduled to also speak, it’s a busy day for the markets.
Earlier in the Day:
Economic data released through the Asian session this morning included consumer confidence figures out of Australia, together with China’s March inflation figures.
For the Aussie Dollar there was further disappointment this morning, following the softer business confidence figures, with the Westpac Consumer Confidence Index falling by 0.6% for April.
The weaker confidence was attributed to concerns over family finances, with the index for family finances over the next 12-months falling by 5.8%, offsetting improved numbers across the other sub-indexes, with the index for family finances compared with a year ago rising by 2.5% and sentiment towards economic conditions over the next 12-months rising by 0.6% and by 2.9% for sentiment for the next 5-years.
The Aussie Dollar eased from $0.77621 to $0.77603 upon release of the figures, with the sub-index for if it’s a good time to buy a major household item falling 1.8% suggesting that household spending could ease back following the bounce in February. At the time of writing, the Aussie Dollar was down 0.08% to $0.7755 reversing gains from earlier in the session.
Inflation figures out of China reversed in March, following February’s surge in consumer prices, with the figures around the Chinese New Year having a tendency to be skewed. April figures out next month will have more relevance, a further fall in consumer prices likely to raise alarm bells over domestic consumption and the outlook for the Chinese economy.
In the equity markets, the Hang Seng and CSI300 continued to move northwards, with gains of 0.75% and 0.73% respectively, positive sentiment towards a U.S – China reconciliation supporting the markets, while the ASX200 and Nikkei were in the red ahead of the close,
A pull-back in the Nikkei came off the back of a stronger Japanese Yen through the morning, the Yen up 0.15% to ¥107.04 against the Dollar at the time of writing, with the U.S futures in the red adding further pressure, while the ASX200 struggled with the big-4 banks in in the red, following the weak business and consumer confidence figures this week.
The Day Ahead:
For the EUR, it’s another quiet day on the data front, with no material stats scheduled for release this morning, while ECB President Draghi could get things going in a scheduled speech this afternoon, any talk of a shift in policy on interest and deposit rates likely to revive the EUR rally that has faltered of late.
At the time of writing, the EUR was up 0.06% to $1.2363, with some continued concern over Trump’s plans for China trade tariffs providing support.
For the Pound, following a quiet start to the week, economic data out of the UK this morning includes February’s trade figures and industrial and manufacturing production numbers.
Numbers in line with forecasts will provide further support for the Pound, with the jump in the UK’s manufacturing PMI in February supporting positive production figures, while this afternoon’s release of the NIESR GDP Estimate will also be there for the markets to consider.
At the time of writing, the Pound was up 0.02% to $1.4179, with solid numbers later this morning supporting the Pound’s move back through to $1.42 levels.
For the U.S Dollar, economic data out of the U.S this afternoon includes March inflation figures and, with the annual rate of baseline inflation forecasted to hit 2.1%, the Dollar may come back to life, having gone into reverse in response to the threat of a trade war with China.
Later in the day, the FOMC’s monetary policy meeting minutes are scheduled for release, which will likely provide more details on where members sit vis-à-vis the rate path for the remainder of the year and what’s needed for a more aggressive policy outlook.
At the time of writing, the Dollar Spot Index was down 0.01% to 89.579, with even Trump unlikely to be able to overshadow the impact of a jump in inflationary pressure on the Dollar.