It's a busy day ahead. Economic data, the ECB, the FOMC, and Brexit will all be in focus through the day.
While it’s a busy day ahead on the economic calendar, stats out of Asia were on the lighter side this morning. Key data included March BRC Retail Sales figures out of the UK and April consumer sentiment figures out of Australia. Core Machinery orders out Japan were also in focus in the early part of the session.
While consumer sentiment figures influenced, the markets also responded to the latest IMF global growth forecasts. On Tuesday, the IMF cut its global growth forecast to its lowest since the Global Finance Crisis. The growth forecast for 2019 was cut from 3.5% to 3.3%. The growth forecast for 2020 was left unchanged at 3.6%.
Core machinery orders slid by 5.5% in February, year-on-year. Orders fell by more than a forecasted 5.2% following a 2.9% fall in January. Month-on-month, orders rose by 1.8%. While partially reversing a 5.4% slide from January, orders fell short of a forecasted 2.5% increase.
According to figures released by the Cabinet Office,
The Japanese Yen moved from ¥111.089 to ¥111.124 upon release of the figures. At the time of writing, the Japanese Yen down by 0.01% to ¥111.15 against the U.S Dollar.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 1.9% to 100.7 in April. The index had fallen by 4.8% to 98.8 in March.
According to the April report,
The Aussie Dollar moved from $0.71263 to $0.71251 upon release of the figures, which got a boost from the 2019 Budget. At the time of writing, the Aussie Dollar was up by 0.08% at $0.7130
The Kiwi Dollar was up by 0.04% to $0.6748 for the session. The Aussie and Kiwi Dollar managed to recover from losses early on.
In the equity markets, the Nikkei, Hang Seng, and CSI300 were all in the red at the time of writing. The Nikkei led way, down by 0.62%. Bucking the trend was the ASX200, which was up by 0.08% ahead of the close.
While there are no material stats scheduled for release later this morning, it’s a big day for the EUR. The ECB will deliver is April policy decision and also hold the all-important press conference.
While there are no expectations that the ECB will make a move later today, forward guidance will be key. Economic data out of the Eurozone has continued to disappoint, which will have added more pressure on the ECB to act.
U.S – China trade talks have progressed, but tariffs remain and the threat of tariffs on the EU have resurfaced. To add fuel to the fire, the IMF also cut the Eurozone’s growth forecast from 1.6% to 1.3% on Tuesday.
Dovish is already priced in but anything veering towards doomsday and expect the EUR to sink. While we’ve heard of the possibility of tiered deposit rates and also seen the ECB re-activate LTRO loans, we’ve not heard any serious chatter on a possible further cut to interest rates.
At the time of writing, the EUR was down 0.04% at $1.1258.
It’s a big day for the Pound. On the economic data front, key stats due out of the UK include GDP, industrial and manufacturing production and trade data.
While we would traditionally see the Pound respond to the GDP and manufacturing production figures, Brexit could overshadow the numbers on the day.
Are we in for one final Brexit twist? Theresa May got the backing of an extension to June, but the EU is veering in favor of a 1-year extension to 30th March 2020. Another year of Brexit… What a prospect.
At the time of writing, the Pound was up 0.02% to $1.3054.
March inflation figures are due out of the U.S this afternoon.
With the markets not expecting the FED to actually cut rates later on in the year. A jump in inflation could have a material impact on the Dollar.
Based on forecasts, there would be little reason for the FED to shift from its March projections so soon, however.
Later on the session, the FOMC meeting minutes are due out that will likely shed some more color on the FED’s intentions, vis-à-vis interest rates, and balance sheet through the 2nd half of the year.
Ahead of the FOMC meeting minutes and inflation figures, FED Chair Powell is scheduled to speak and could ultimately overshadow the meeting minutes if there’s any policy chatter that falls outside of market expectations.
Status quo and the spoils could likely go to the EUR, barring any surprise move by the ECB.
At the time of writing, the Dollar Spot Index was up by 0.03% to 97.037.
There are no material stats scheduled for release to provide the Loonie with direction. Of interest, however, will be the OPEC Monthly report and inventory numbers out of the U.S.
A confirmed cut in production would be supportive of crude oil prices and the Loonie on the day.
The Loonie was down 0.02% at C$1.3333, against the U.S Dollar, at the time of writing.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.