- Australian data disappoints raising specter of rate cut
- EZ services PMI improve supporting EUR/USD
- Europe -0.21% Nikkei closed
- Oil $96/bbl
- Gold $1473/oz
AUD: Inflation gauge 0.3% vs. 0.2%
AUD: Retail Sales -0.4% vs. 0.2%
AUD: Job Advertisement -1.3% vs. -0.5%
EUR: Services PMI 47 vs. 46.3
EUR: Retail Sales
North America
CAD: Ivey PMI 10:00
It's been a predictably quiet start to the week in the currency markets today with both Tokyo and London closed for holidays, creating thin trading conditions so far. The biggest loser of the night was the Aussie after a series of disappointing data points from both Australia and China raised the spectre of a possible rate cut at tomorrow’s RBA meeting.
Australian retails sales contracted in March, printing at -0.4% versus 0.2% eyed. The report showed spending on clothing, footwear and personal accessories fell 4.2 percent, and consumers spent 1.5 percent less on household goods. On an inflation adjusted basis, retail sales increased by 2.2% versus 1.7% forecast for the three months through March, but the number was nevertheless a disappointment as it showed that demand is clearly slowing.
The slowdown in economic activity was also reflected in the ANZ job advertisements figures which dropped -1.3% from -0.5% the month prior – their second consecutive negative print this year. Finally, China’s services PMI badly missed its mark printing at 51.1 versus 54.3 in March.
The overall news from Down Under set investors in a foul mood as the market now anticipates a 55% chance of an RBA rate cut at tomorrow’s policy meeting. Australian policymakers have been clearly frustrated with the strength of the Aussie which they feel undermines export competitiveness and weighs on growth. A spokeswoman for Treasurer Wayne Swan said in an e-mailed statement:
“There’s no doubt that the persistently high dollar continues to have an acute and widespread impact on prices and profitability across the board, which has been one of the key drivers behind the recent hit to government revenues.”
The Aussie remained heavy all night long, sinking to a low of 1.0245 in mid-morning European trade. The pair may test the recent lows of 1.0225 as the day progresses, but if the RBA does cut rates. and worse, suggests that it may ease policy further in the foreseeable future, the pair could quickly tumble to test support at parity as the recently laid carry trades are quickly unwound.
Meanwhile, the mood was slightly better in Europe where the EZ Service PMIs showed a modicum of improvement. EZ PMI printed at 47 versus 46.3 – still well below the 50 boom/bust line but a tad better than forecast. The news suggests that the beleaguered EZ economy may be in the process of bottoming out as demand finally stabilizes.
With the US economic calendar empty today, trading during the North American session may be subdued, although some positive follow-through from Friday’s NFP report could buoy risk flows as the day proceeds. USD/JPY has traded well in the overnight session, inching its way towards the 99.50 level and if it pops back above that barrier the focus will turn once again on the 100 mark. There is very little US economic data this week, but if risk flows remain positive, the pair could make another run at that key psychological level.