19 January 2012 at 5:13 GMT
Despite a dramatic Australian employment report, ranges in Asia for most currencies were controlled and steady.
Headline numbers for the Australian employment report suggested the “showcase” economy was given a real dose of reality in December. Consensus was for 10k jobs to be added during the month but the headline number came out much worse – 29.3k jobs were lost which resulted in a quick 30-40 point fall for AUDUSD. However, drilling down into the headline number it emerged that 24.5k full-time jobs were added during the period, negated by a hefty 53.7k losses in the part-time category. As a result the AUD’s slide was contained, though as we go to press any substantial rebound has proved elusive. The unemployment rate was unchanged from a downwardly-revised 5.2 percent the previous month with the participation rate falling to 65.2 percent from 65.5 percent.
Elsewhere, New Zealand’s inflation rate fell unexpectedly in Q4 with lower food prices helping the cause. CPI was down 0.3 percent q/q and below forecast 1.8 percent y/y and comfortably within the Reserve Bank of New Zealand''s 1-3 percent band. A large chunk of the annual decline in CPI can also be attributed to October 2010’s Goods and Services Tax hike dropping out of the equation. Nevertheless, a more benign environment may give the RBNZ more leeway to keep rates at low levels, or indeed increase calls for further rate cuts.
The EUR climbed slowly but steadily back to overnight highs with markets still mindful of a Financial Times report suggesting private sector involvement (PSI) talks in Greece are moving closer to a deal that would avoid a default. Details are still muddled with some suggesting a variable coupon rate starting at 3 percent and rising to 4.5 percent closer to maturity. Others suggest the average interest rate would be 4.25 percent and a likely haircut of around 68 percent.
We saw a mixed session for risk and the associated currencies overnight, with the bulls eventually winning. EUR slid initially as Fitch announced a two notch Italian downgrade but the dip was brief and news that the International Monetary Fund was hoping to boost its lending power by USD 500 bln saw a faster move through 1.28 versus the dollar. The rally halted briefly after USA and Canada announced that they had no more plans for more IMF funding. Nevertheless, momentum and better US data helped the risk-on trade and the NY session closed at the highs. GBP was able to shrug off an unchanged UK unemployment rate, though still at 17-year highs, as the claims change only posted a 1.2k increase.
On the US front, producer prices were lower in December (-0.1% m/m from +0.3% last) but core levels were higher (up 0.3% m/m from +0.1%). Industrial production was a mild disappointment at +0.4 percent versus +0.5 percent consensus with capacity utilization bang in line with forecasts at 78.1 percent and up from 77.8 percent last. The good news came from the NAHB housing market index which rose to 25 from 21 (22 expected) and was the best survey since June 2007 giving further evidence that the US housing market may be bottoming out. Wall St pushed higher on the back of the data with the S&P scaling, and closing above, the 1,300 handle for the first time since July 28 last year.
Data Highlights
- US MBA Mortgage Applications out at +23.1% vs. 4.5% prior
- US Dec. PPI out at -0.1% m/m, +4.8% y/y vs. 0.1%/5.1% expected and 0.3%/5.7% prior resp.
- US Dec. Core PPI out at +0.3% m/m, +3.0% y/y vs. 0.1%/2.8% expected and 0.1%/2.9% prior resp.
- US Nov. Net Long-term TIC Flows out at $59.8 bln vs. $40.0 bln expected and revised $8.3 bln prior
- US Dec. Industrial Production out at +0.4% vs. 0.5% expected and revised -0.3% prior
- US Dec. Capacity Utilization out at 78.1%, as expected vs. 77.8% prior
- US Jan. NAHB Housing Market Index out at 25 vs. 22 expected and 21 prior
- NZ Q4 CPI out at -0.3% q/q, +1.8% y/y vs. +0.4%/2.6% expected and 0.4%/4.6% prior resp.
- AU Dec. Employment Change out at -29.3k vs. 10.0k expected and revised -7.5k prior
- AU Dec. Unemployment Rate out at 5.2% vs. 5.3% expected and revised 5.2% prior
- AU Dec. Participation Rate out at 65.2% vs. 65.5% expected and 65.5% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- JP Dept. Store Sales (0530)
- EU ECB Monthly Report (0900)
- EU Current Acct Balance (0900)
- EU ECB’s Draghi to speak (1200)
- CA Manufacturing Sales (1330)
- US CPI (1330)
- US Housing Starts (1330)
- US Building Permits (1330)
- US Initial Jobless Claims (1330)
- US Bloomberg Consumer Comfort Index (1445)
- US Bloomberg Economic Expectations (1445)
- US Philadelphia Fed Index (1500)
- EU ECB’s Weidmann to speak (1700)