Kim Jong Un crosses the DMZ into South Korea, the Bank of Japan ditches a target date for inflation to hit its 2% objective as the markets look towards GDP numbers out of EU member states, the UK and the U.S later in the day.
Earlier in the Day:
Economic data released through the Asian session was on the heavier side this morning, with stats including New Zealand’s trade figures for March, inflation, industrial production and retail sales figures out of Japan and wholesale price inflation numbers out of Australia.
For the Kiwi Dollar, the trade deficit widened from NZ$3,070m to NZ$3,420m in March, year-on-year, with the month-on-month trade balance sliding from a NZ$172m surplus to a NZ$86m deficit at the end of the quarter.
Year-on-year, goods exports increased by NZ$265m (5.8%) to NZ$4.9bn, while goods imports rose by NZ$612m (14%) to NZ$4.9bn.
Milk power, butter and cheese led the export rise, up NZ$116m (11%) to NZ$12bn, with the export of logs, wood and wood articles (18%) and petroleum and products other than crude seeing a moderate increase.
Exports to Australia saw the largest rise, up 11%, followed by the U.S up 5.8% and the EU, up 4.9%, while exports to China slipped 4.3% and down by 3.9% to Japan.
On the import side, petroleum and products rose by a whopping NZ$297m (88%), driving the headline figure, with imports of aircraft and parts, mechanical machinery and equipment and vehicles parts and accessories also contributing.
By country, imports from the U.S were up 30%, up 19% from the EU and 4.7% from China, while down by 8.8% from Japan.
The March monthly deficit was the first deficit since 2008, figures released by Stats New Zealand.
The Kiwi Dollar moved from $0.70628 to $0.70565 upon release of the figures, which will weigh on 1stquarter GDP numbers.
For the Aussie Dollar, wholesale price inflation eased in the 1st quarter from 0.6% to 0.5% quarter-on-quarter, while holding steady at 1.7% year-on-year.
Supporting wholesale price inflation included rising electricity, gas and water supply prices (+3.4%); rising prices for heavy and civil engineering (+0.6%) and a 3.8% increase in prices for petroleum refining and fuel manufacturing.
Partially offsetting the rise in prices were declines in prices for pharmaceutical and medicinal product manufacturing (-1.6%); commercial fishing (-10.4%) and oil and fat manufacturing (-5.5%).
The Aussie Dollar moved from $0.75521 to $0.75525 upon release of the figures, before rising to $0.7555 at the time of writing, up 0.01% for the day.
For the Japanese Yen, Tokyo core inflation slipped from 0.8% to 0.6% in April, with retail sales also seeing just a 1% rise in March, year-on-year, following February’s 2% rise, while industrial production increased by 1.2%, ahead of a forecasted 0.5% increase, following February’s flat finalized number.
The Japanese Yen moved from ¥109.309 to ¥109.318 upon release of the stats that also included the March jobs to applications ratio that rose from 1.58 to 1.59.
With the stats coming in ahead of the BoJ monetary policy decision, the softer inflation numbers will continue to support a dovish BoJ that could see further softness in the Yen, the weaker retail sales figures unlikely to give too much hope of a shift in inflationary pressures any time soon.
While the BoJ’s decision to hold rates unchanged this morning was expected, the press conference later in the session will garner more attention, any dovish commentary likely to weigh on the Yen through the session.
The Japanese Yen moved from ¥109.16 to ¥109.225 following the announcement and release of the outlook report and monetary policy statement, with the BoJ removing any reference to when it expected to meet its 2% inflation target, the economy considered to be doing well, supported by strong demand for Japanese goods from overseas. Rates were left at -0.1% and the Bank will continue to hold 10-year yields at around 0%.
In the equity markets, it was risk on with the Nikkei and ASX200 up 0.42% and 0.32% respectively, while the Hang Seng was up 0.24%, with the CSI300 giving up early gains to sit in the red early in the session.
An overnight rebound in the tech sector, some positive earnings and a rise in oil prices were the positives for the markets, with news of North Korean leader Kim Jong Un crossing the DMZ for a summit with South Korea adding support to the equity markets this morning, while concerns over U.S and China trade relations weighed on the CSI300.
The Day Ahead:
For the EUR, economic data scheduled for release this morning is on the heavier side and includes inflation and GDP numbers out of France and Spain, unemployment numbers out of Germany and French consumer spending figures.
We will expect the figures to have an influence on the EUR, with any hint of a pickup in inflation and stable economic growth through the 1st quarter the best outcome for the EUR and those looking for Draghi to begin shifting on policy towards interest rates.
At the time of writing, the EUR was up 0.06% to $1.2110, with the EUR now in the hands of the stats following Draghi’s speech at Thursday’s press conference that saw EUR pullback to $1.21 levels, any soft inflation numbers likely to bring $1.19 into play in the coming weeks.
For the Pound, economic data includes prelim 1st quarter GPD numbers and house price figures for March. The markets will more than likely ignore the house price figures, with the GDP number now key to weather the BoE can consider lifting rates next month. A stable economy and unemployment rate coupled with an inflation overshoot would more than likely see the markets begin to price back in a May hike that should see the Pound recover to $1.40 levels, while weak numbers will be another reason for BoE to stand pat.
At the time of writing, the Pound was up 0.06% to $1.3928, with Brexit chatter also there for the markets to consider ahead of the weekend.
Across the Pond, focus will be on 1st quarter GDP and employment cost numbers, any better than forecasted figures another Dollar positive, with the markets expecting upward revision to GDP numbers following the March goods trade numbers released on Thursday.
On the geo-political front, the North Korean summit with South Korea will also be considered a positive, as the Dollar continues to recover the losses from the start of the year.
At the time of writing, the Dollar Spot Index was down 0.03% to $91.532, with today’s stats and noise from the Oval Office the key drivers through the day, the U.S president now turning his attention to the Iran nuclear agreement.