Earlier in the Day:
Economic data released through the Asian session was on the lighter side this morning. Key stats were limited to household spending out of Japan.
Outside of the numbers, the RBA also released its statement on monetary policy.
For the Japanese Yen
According to figures released by the Statistics Bureau, household spending increased by 0.1%, year-on-year, falling short of a forecasted 0.8% rise, whilst recovering from a revised 0.5% fall in November.
The rise in spending was attributed to:
- Ay 19.4% surge in spending on housing, with spending also on the rise on furniture & household utensils (+7.3%); education (+7%); transportation & communication (+5.1%); clothing & footwear (+4.3%); and culture & recreation (+1.1%).
- Partially offsetting the increase spending were declines in spending on fuel, light & water charges (-13.3%); medical care (-6%); and food (-3.2%).
Month-on-month, spending fell by 0.1%, which was better than a forecasted 0.2% decline following a 1.1% rise in November.
The Japanese Yen moved from ¥109.790 to ¥109.781 against the Dollar, upon release of the figures. At the time of writing, the Japanese Yen stood at ¥109.7 against the Dollar, up 0.11% for the session
For the Aussie Dollar
The RBA Statement of Monetary Policy was released in the early hours.
Following dovish commentary from RBA Governor Lowe the day after the RBA’s policy decision and release of the rate statement on Tuesday, there was more bad news for the Aussie Dollar.
Growth forecasts were revised downwards and the revisions were certainly not minor.
- For year-ended June 2019, GDP growth was revised down from 3.25% to 2.5%. For year-ended December 2019, growth was revised down from 3.25% to 3%.
- Things were not much better for 2020. Year-ended June 2020 GDP forecasts were revised down from 3.25% to 2.75% and from 3% to 2.75% for year-ended December 2020.
- For year-ended June 2021, the GDP growth estimate came in at 2.75%.
Inflation was also revised down,
- CPI inflation was forecasted to come in at 1.25% for year-ended June 2019, revised from a previous 2%. For year-ended December 2019, inflation was revised down from 2.25% to 1.75%.
- Forecasts for year-ended June 2020 were also revised down, from 2.25% to 2%, whilst year-ended December 2020 forecasts were left unchanged at 2.25%.
The Aussie Dollar moved from $0.70975 to $0.70697 upon release of the statement. At the time of writing, the Aussie Dollar stood at $0.7074, a loss of 0.38% for the session.
The Kiwi Dollar was up by 0.10% to $0.6756, a recovery from earlier losses coming ahead of next week’s RBNZ policy decision. The Kiwi bulls could be in for a surprise, with the RBNZ likely to be joining the doves in next week’s meeting.
This morning’s growth forecasts released by the RBA come off the back of the ECB’s forecasts released on Thursday, which were also revised downwards.
In the equity markets, it was back in the red for the majors.
The ECB’s revisions to growth, Trump’s pessimism over a trade agreement being hashed out ahead of a 1st March rollout of fresh tariffs and this morning’s gloomy RBA forecasts added pressure on riskier assets.
At the time of writing, the ASX200 was down by 0.43%, while the Nikkei was down by 1.77%.
The Day Ahead:
For the EUR
Germany is back in the spotlight. Following disappointing factory order and industrial production figures released this week, December’s trade figures will be the key driver for the EUR.
The ECB’s economic bulletin raised enough red flags for the EUR to face the prospect of a pullback to $1.12 levels should the stats continue to weaken. While forecasts are for the trade surplus to narrow, the real question will be by how much.
If Germany’s January manufacturing PMI is anything to go by, new export orders seeing the largest fall in 6-years, the doom and gloom may not end in December…
At the time of writing, the EUR was flat at $1.1341.
For the Pound
There are no material stats scheduled for release through the day. Following BoE Governor Carney’s comments on Thursday, where he said that further rate hikes should not be priced out of the Pound, its back into the red in the early part of the day.
Focus returns to Brexit and whether Theresa May can find more support for concessions to deliver a deal acceptable to Parliament.
We can expect Brexit chatter to have a significant influence, with any chances of a pickup in economic growth hinged on a soft Brexit.
At the time of writing, the Pound was down 0.02% at $1.2932.
Across the Pond
There are also no material stats scheduled for release through the day. Dovish central bank commentary by the ECB and RBA have provided the Dollar with support this week, the FED continuing to talk up the U.S economy in spite of an acknowledgment that rate hikes may need to pause.
The lack of stats will leave the Oval Office in focus, any trade chatter likely to influence.
At the time of writing, the Dollar Spot Index was up by 0.06% to 96.564.
For the Loonie
It’s a busy day on the data front. Key stats scheduled for release include January housing start figures and labor market statistics. The focus will be on January’s employment change data and the unemployment rate, a forecasted uptick in the unemployment rate a negative for the Loonie.
Outside of the numbers, market risk sentiment will play a hand, with Trump’s pessimism over a U.S – China trade agreement by the end of this month, weighing on crude oil prices and the Loonie in the early part of the day.
The Loonie was down by 0.10% to C$1.3321, against the U.S Dollar, at the time of writing.