Kay Van-Petersen
Saxo's global macro strategist Kay Van-Petersen examines the big issues for the markets including AUDUSD, potential US-China trade war and interest rates.
Article / 13 May 2014 at 7:17 GMT

FX Update: ECB’s Weidmann to speak, US retail sales on tap

Head of FX Strategy / Saxo Bank
• AUD eased lower on soft quarterly housing data
• Commodity currencies weaker on China's slowdown
• Swedish CPI, German ZEW and ECB talking heads on the agenda

By John J Hardy

Interesting house price and home loan data out of Australia overnight, which saw the AUD easing lower, as home prices rose far less than expected in the first quarter (on a quarterly comparison basis, even if the year-on-year data exceeded expectations) while the rate of home lending dropped in April. AUDUSD is near the first key support are near 0.9300.


China's decision to pedal in a slower lane is hurting the Aussie dollar. Photo: TongRo Images

Chinese industrial production and retail sales data came in just under expectations according to likely massaged data. Still, the industrial production number was the lowest since 2009 and the retail sales rose at the slowest rate on a two-month average basis in 10 years. Clearly, China is slowing and doing so intentionally.
In the market, the commodity currencies edged weaker, and the USD was more or less flat versus the European majors while CHF and JPY have been edging weaker to start the week and saw a weak Asian session after the strong US equity market close that is continuing into this morning.


Source: Bloomberg and Saxo Bank

Looking ahead
A number of interesting event risks will be strung out through the day and into Wednesday’s Asian session, offering traders plenty of moments to find trading opportunities.

Swedish CPI – first up this morning we have Sweden’s CPI data, which is critical for keeping the pressure on SEK after EURSEK has traded above 9.00 and after a dovish European Central Bank (ECB) meeting. The Bloomberg consensus is looking for a jump to +0.4 percent for the core CPI reading vs. 0.0 percent in March. The next Riksbank meeting is not until July 3, but this will be a key event in the market’s assessment of whether the Swedish central bank cuts (now considered very likely). The important support level in EURSEK comes in at 9.00. The first major resistance is at 9.10 ahead of the 9.1375 top.

Germany ZEW – we now have four ZEW surveys in a row with lower readings on the expectations side – a worrying development, as trends tend to persist for considerable time. The IFO expectations survey out earlier this month managed to bounce, however. The current situation portion of the ZEW survey has not yet turned lower and set a high last month since July 2011.

Eurozone’s Weidmann to speak – critical for follow-up on what Mario Draghi said at last week’s ECB meeting – the Bundesbank must be on board for any kind of asset purchase programme to become a reality. A Goldman analyst thinks it may never happen – but if not, we’ll have a fresh new euro crisis, in my view.

US April Advance Retail Sales – how strong is the US consumer now that we are clear of the worst of the winter weather? March saw a strong bounce. Market looking for a solid 0.5 percent at the core (ex Autos and Gas).

New Zealand’s Wheeler out speaking – the reserve Bank of New Zealand is clearly getting very concerned on the exchange rate front and Wheeler could wave around the threat to not move on rates at the next RBNZ meeting or even intervention (has happened before). Rate expectations have remained relatively stable for the year forward and the 2-year NZ rates have ticked back higher to 4 percent, so we’ll need to see some dovish rhetoric tonight from Wheeler to push NZ lower relative to its commodity dollar peers. The 1.0900 level in AUDNZD is a particularly interesting one in that regard.

Watch for Australia’s Budget announcement this morning, which could get attention on the potential for encouraging/discouraging growth and the resultant RBA policy implications. Large cuts are planned for public service jobs and the more the plan leans toward austerity, the more we can expect domestic weakness in the months ahead.

Economic Data Highlights 
  • UK Apr. BRC Sales Like-for-like out at +4.2% YoY vs. +1.6% expected and -1.7% in Mar.
  • Australia Mar. Home Loans fell -0.9% v. +1.0% expected
  • Australia Q1 House Price Index rose +1.7% QoQ and +10.9% YoY vs. +3.0%/+10.4% expected, respectively and vs. +9.8% YoY in Q4
  • China Apr. Retail Sales rose +11.9% YoY vs. +12.2% expected and +12.2% in Mar.
  • China Apr. Industrial Production rose +8.7% YoY vs. +8.9% expected and +8.8% in Mar.

Upcoming Economic Calendar Highlights (all times GMT)
  • Sweden Apr. CPI (0730)
  • UK Bank of England’s Cunliffe to Speak (0810)
  • Germany May ZEW Survey (0900)
  • Euro Zone ECB’s Lautenschlaeger, Weidmann to Speak (0900)
  • Australia Treasurer Hockey to Release Budget (0930)
  • US Apr. NFIB Small Business Optimism (1130)
  • US Apr. Advance Retail Sales (1230)
  • US Fed’s Lacker to Speak (1430)
  • Canada Bank of Canada publishes review (1430)
  • Sweden Riksbank Deputy Governor Ekholm to Speak (1530)
  • New Zealand RBNZ Financial Stability Report (2100)
  • New Zealand RBNZ Governor Wheeler News Conference (2105)
  • New Zealand Q1 Retail Sales (2245)
  • Japan Apr. Domestic CGPI (2350)

— Edited by Clare MacCarthy


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