13 January 2011 at 6:08 GMT
Yet AUD has yet to break out either side of recent range
Market Comments:
The EUR produced its next phase of short squeeze overnight as a positive Portuguese bond auctions, firm German GDP and Euro-zone industrial production data set markets up for a stop-loss fest later on. Upward momentum was further enhanced by additional comments from German Finance Minister Schaeuble who said Euro nations were working on a mid-term solution to the Euro-zone debt crisis. But activity was not just confined to the EUR with the US dollar retreating across the board, sending the USD index down to one-week lows. GBP found a strong bid despite another horrendous trade number and even the beleaguered AUD found some lagging support ahead of today’s employment report (see below).
Canadian Finance Minister Flaherty noted that the recent CAD strength is reflective of Canada’s fiscal stability and it was unlikely that the CAD would return to its undervalued levels. CAD strength also helped by firmer oil prices which breached the $92 p/barrel mark for the first time since October 2008. There was little to excite on the US data front – weekly mortgage applications were steady while December’s import prices were a touch lower than the previous month. Wall St had a strong day with the financial sector leading the way following reduced EU debt concerns.
The highlight for the Asian session was the release of Australian jobs data for December and the data disappointed for the first time since February 2010. Australia only managed to add 2,300 jobs in the month, thankfully most of them in the full-time category, but nevertheless well below the market’s 25k forecast and November’s huge 54.6k. In light of the almost 500k jobs that have been added in the past 15 months, some correction was perhaps inevitable. The unemployment rate eased off to 5.0% from 5.2% last and beat forecasts of 5.1%, but this can be explained away with a lower participation rate that dipped to 65.8% from a revised 66% last. AUD was understandably volatile after the conflicting headline data and any sense of true direction was yet to be determined by the end of the Asian session.
Another item of note for Asia was today’s USDCNY by the PBOC. Given the dollar’s fall overnight the USDCNY was fixed at 6.5997, its lowest since the July 2005 revaluation, and comes conveniently ahead of Chinese President Hu’s visit to the US on January 19-21. In a move which we think will be echoed across most Asian economies, the Bank of Korea hiked rates by 25bp to 2.75%, a surprise for the markets, as it takes its first “baby steps” (to quote BOK chief Kim Choong-soo) to tame inflation. Note also that Thailand hiked by 25bp yesterday.
Europe focuses on German wholesale prices, Sweden’s CPI and UK industrial production while Spanish and Italian bond auctions will be another important test for EUR support. We also have rate announcements from the BOE and ECB, with a small murmur in the markets of a possible rate hike from the BOE (no doubt due to persistently high CPI). The North American session has a busy schedule with Canada’s trade data, US weekly jobless claims, PPI and trade balance.
Economic Data Highlights
- CA Nov. New House Price Index out at +0.3% m/m vs. 0.1% expected and 0.1% prior
- US Dec. Import Price Index out at +1.1% m/m, +4.8% y/y vs. 1.2%/4.7% expected and revised 1.5%/3.9% prior resp.
- US Dec. Monthly Budget Statement out at -$80.0b, as expected, vs. -$91.4b prior
- NZ Dec. Card Spending out at -0.9% m/m vs. revised +1.0% prior
- NZ Dec. QV House Prices out at -0.9% y/y vs. +0.3% prior
- JP Nov. Machine Orders out at -3.0% y/y, +11.6% y/y vs. 2.0%/17.4% expected and -1.4%/+7.0% prior resp.
- AU Dec. Employment Change out at 2.3k vs. 25k expected and 54.6k prior
- AU Dec. Unemployment Rate out at 5.0% vs. 5.1% expected and 5.2% prior
- NZ Dec. ANZ Commodity Price Index out at +2.0% m/m vs. 4.5% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- GE Wholesale Price Index (0700)
- Sweden CPI (0830)
- UK Industrial/manufacturing Production (0930)
- UK BOE Rate Announcement (1200)
- EU ECB Rate Announcement (1245)
- EU ECB News Conference (1330)
- CA Int’l Merchandise Trade (1330)
- US Initial Jobless Claims (1330)
- US PPI (1330)
- US Trade Balance (1330)