China Trade Data, German Stats and U.S NFP and Wage Growth Numbers in Focus

Earlier in the Day:

It was a busy day on the Asian economic calendar this morning. The Japanese Yen, Kiwi Dollar and Aussie Dollar were in action in the early part of the day.

Key stats included household spending figures out of Japan and New Zealand inflation expectation numbers for the 2^nd quarter. Later in the day, January trade data are also due out of China.

On the monetary policy front, the RBA also released its quarterly Statement of Monetary Policy early in the day. The statement release came after RBA Governor Lowe gave testimony before the House of Representatives’ Standing Committee on Economics.

There was little to shift the dial, with concerns over the effect of the coronavirus Aussie Dollar negative, while affirming that negative rates remain unlikely provided support.

On the economic outlook, the RBA Governor stated that growth would rise to 2.75% for the current year and up to 3% for next year.

The RBA Governor also talked of household spending that continued to be soft and remained a significant domestic issue.

For the Japanese Yen

Household spending fell by 4.8% in December, year-on-year, following a 2% fall in November. Economists had forecast a 1.7% fall. Month-on-month, household spending declined by 1.7%, following a 2.6% rise in November. Economists had forecast a 0.2% rise.

According to the Statistic Bureau,

• There were heavy falls spending on housing (-17.4%), education (-16.6%), furniture & household utensils (-13.3%), and clothing & footwear (-11.1%).
• Spending also declined on food (-2.1%), fuel, light & water charges (-1.8%), transportation & communication (-1.6%), and culture & recreation (-1.8%).
• Spending on medical care rose by 6.1%, over the year, to buck the trend in December.

The Japanese Yen moved from ¥109.990 to ¥109.970 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.07% to ¥109.91 against the U.S Dollar.

For the Aussie Dollar

The RBA’s quarterly statement on monetary policy was in focus early in the day. Salient points from the Statement included:

• Monetary policy easing from 2019 is supporting the overall growth outlook through a number of channels.
• Lower interest rates have contributed to increased demand for new and existing homes.
• Lower household debt payments have resulted in extra cash flows that can be spent or pay down debt faster.
• Slow growth is likely to extend into 2020 because of the ongoing drought, the effects of the bushfires and the impact of the coronavirus outbreak on Australian exports.
• The medium-term outlook for the economy remains unchanged from the last quarter.
• GDP growth is expected to be 2.75% over 2020 and around 3% over 2021.
• A key consideration for monetary policy remains the outlook for consumption. In the 3^rd quarter, consumption was weaker than earlier expected and likely remained subdued in the 4^th
• Consumption growth is expected to recover gradually during this year and next.
• Employment growth is anticipated to pick up along with economic growth, which would support wage growth over time.

The Aussie Dollar moved from $0.67204 to $0.67162 upon release of the statement that preceded China’s trade data. At the time of writing, the Aussie Dollar was down by 0.15% to $0.6720.

For the Kiwi Dollar

Inflation expectations for 2-years picked up in the 1^st quarter, rising from 1.80% to 1.93%, reversing a fall from 1.86% to 1.80% in the 4^th quarter. Inflation expectations had stood at 2.01% back in the June quarter of last year.

According to the RBNZ’s survey of expectations,

Inflation expectations for 1-year out rose from 1.66% to 1.88%, also reversing a fall from 1.71% in the 3^rd quarter to 1.66% in the 4^th quarter.

The Kiwi Dollar moved from $0.64533 to $0.64527 upon release of the figures. At the time of writing, the Kiwi Dollar down by 0.02% to $0.6457.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Key stats due out of the Eurozone include December industrial production and trade data out of Germany.

French nonfarm payroll figures are also due out for the 4^th quarter but will likely have a muted impact on the EUR.

Following some particularly disappointing factory order numbers on Wednesday, the EUR may well come under further pressure should production figures disappoint.

On Wednesday, ECB President Lagarde spoke of tentative signs of stabilization in the Eurozone economy. While PMI numbers support that, weak numbers today will raise further red flags.

At the time of writing, the EUR was flat at $1.0983.

For the Pound

It’s a quiet day ahead on the economic calendar, with no material stats due out of the UK to provide the Pound with direction.

The lack of stats leaves the Pound in the hands of Brexit chatter, which is unlikely to be too supportive.

At the time of writing, the Pound was up by 0.09% to $1.2942.

Across the Pond

It’s a busy day ahead on the data front.

Key stats due out of the U.S include January’s unemployment rate, nonfarm payroll, and wage growth figures.

Following the ADP numbers from Wednesday, the markets will be looking for nonfarm payrolls to come in ahead of forecasts. Any revisions to November’s figures will also need consideration. Economists have forecast wage growth to pick up to 3.0%, which would also be Dollar positive.

A solid rise in nonfarm payrolls should leave the unemployment rate steady at 3.5%.

At the time of writing, the Dollar Spot Index was down by 0.07% to 98.428.

For the Loonie

It’s a busy day ahead on the economic calendar. Key stats include January employment figures and the Ivey PMI.

Following the BoC’s dovish stance on policy at the last meeting, expect weak numbers to materially weigh on the Loonie.

The Loonie had found strong support from better than expected employment figures for December. Weak numbers today will likely return the Loonie to C$1.33 levels, with an eye on C$1.34 against the Greenback.

Forecasts are skewed in favor of the Loonie. The Ivey PMI is forecast to rise from 51.9 to 53.3, with further 15.0k jobs expected to be added. The unemployment rate is forecast to hold steady at 5.6%.

The Loonie was down by 0.02% at C$1.3287 against the U.S Dollar, at the time of writing.