China Data Disappoints as Focus Shifts to NFP Data and the U.S Dollar

Trade data out of China weighed on risk sentiment early on, as focus shifts to the nonfarm payroll and wage growth figures out of the U.S.
Bob Mason
Non-farm employment change, payrolls or NFP.

Earlier in the Day:

Economic data released through the Asian session was on the heavier side this morning. January household spending and 4th quarter GDP numbers out of Japan kicked off the session. Later on in the morning, China’s February’s trade data was released.

For the Japanese Yen,

Household spending increased by 2% in January, year-on-year. Forecasts were for a 0.5% fall, following a 0.1% rise in December.

According to figures released by the Ministry of Internal Affairs and Communications,

  • Notable increases in household spending were reported on housing (+18%) and education (+17.7%).
  • There were also sizeable increases in spending on transportation and communication (+6.1%); culture & recreation (+3.8%); furniture & household utensils (+3.6%).
  • Household spending on food increased by just 0.1% year-on-year.
  • Notable decreases in household spending were on fuel, light & water charges (-8.3%); medical care (-4.6%) and clothing & footwear (-4.1%).
  • Household incomes rose by 3.6% year-on-year, with disposable income rising by 3.9%, supporting the uptick in household spending.
  • Month-on-month, household spending rose by 0.7%, reversing the previous month’s 0.1% decline.

The Japanese Yen moved from ¥111.585 to ¥111.623, against the U.S Dollar, upon release of the figures, which preceded the GDP numbers.

Japan’s economy grew by 0.5% in the 4th quarter, quarter-on-quarter. Forecasts were for a 0.4% rise, following a 1st estimate 0.3% rise.  The economy had shrunk by 0.7% in the previous quarter.

Year-on-year, the economy grew by 1.9%, which was better than a forecasted 1.8% and prelim 1.4%. The economy had contracted by 2.6% in the 3rd quarter.

According to figures released by the Cabinet Office, notable contributions to growth include:

  • Private non-residential investment (business inv.) rose by 2.7%, which was better than a 1st estimate 2.4% increase.
  • Both private and domestic demand figures were also revised upwards in the final numbers.

The Japanese Yen moved from ¥111.621 to ¥111.604, against the U.S Dollar, upon release of the figures. At the time of writing, the Japanese Yen stood at ¥111.4, up 0.16% for the session.

Out of China,

The trade surplus narrowed from $39.16bn to $4.12bn in February.

  • Dollar-denominated exports fell by 20.7%, which was worse than a forecasted 4.5% decline. In January, exports had risen by 9.1%.
  • Imports fell by 5.2%, which was worse than a forecasted 1.4% fall. Imports had fallen by 1.5% in January.

The Aussie Dollar moved from $0.70283 to $0.70133 upon release of the figures. At the time of writing, the Aussie Dollar stood at $0.70120, down 0.06% for the session.

The Day Ahead:

For the EUR

Key stats scheduled for release through the day are on the lighter side today. Germany’s January factory order figures will provide the EUR with direction through the early part of the day. Forecasts are for a pickup in orders, though whether it will be enough to shift sentiment towards the Germany economy remains to be seen.

Outside of the numbers, market risk sentiment will have an influence as the markets continue to respond to Thursday’s ECB press conference. This morning’s trade figures out of China will likely limit any chance of any recovery from Thursday’s sell-off

At the time of writing, the EUR up by 0.04% at $1.1197.

For the Pound

There are no material stats scheduled for release through the day to provide direction for the Pound. With the 12th March meaningful vote rapidly approaching, all eyes will be on Brussels and parliament. It looks like Brussels is looking to test the British government’s resolve.

While there had been hopes of support for Theresa May’s deal on Tuesday, recent chatter suggests otherwise.

A no-deal outcome, however unlikely, remains the worst case scenario for both sides.

At the time of writing, the Pound was up by 0.06% to $1.3093.

Across the Pond

The economic calendar is on the busier side throughout the day. Key stats scheduled for release includes February’s nonfarm payroll and wage growth figures. While the focus will be on the nonfarm payroll and wage growth figures, expect the Dollar to respond to any fall in the unemployment rate.

Outside of the numbers, chatter from the Oval Office will need to be monitored through the day.

At the time of writing, the Dollar Spot Index was down 0.10% to 97.566.

For the Loonie

February employment figures will provide direction to the Loonie through the day. A slide to $1.34 levels following the Bank of Canada’s dovish outlook could continue if the numbers disappoint, however.

Forecasts are for the unemployment rate to fall from 5.8% to 5.7%, a positive for the Loonie. In contrast, employment is forecasted to fall, which would offset any upside for the Loonie.

Outside the stats, market risk sentiment and crude oil prices will provide direction, though sensitivity will depend upon this afternoon’s numbers.

The Loonie was flat at C$1.3455, against the U.S Dollar, at the time of writing.

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