Economic Data Puts the EUR, GBP and US Dollar in Focus. Coronavirus News Updates Will Need Monitoring, However

Earlier in the Day:

It was a relatively busy start to the week on the economic calendar this morning. The Kiwi Dollar and Aussie Dollar were in action through the early part of the day, with economic data out and monetary policy in focus.

While economic data was in focus, the markets also reacted to the overnight moves in the U.S.

A realization that neither monetary nor fiscal policy would offset the immediate impact of the virus remains evident across the global financial markets.

Later in the morning, finalized industrial production figures out of Japan would likely have a muted impact on risk appetite.

For the Kiwi Dollar

Consumer sentiment for the 1^st quarter was in focus early in the session. The Westpac Consumer Sentiment Index slid from 109.9 to 104.2 in the 1^st quarter.

According to the latest Westpac report,

• Headwinds stemming from the spread of the coronavirus and drought weighed on sentiment in the 1^st
• The Present Conditions Index fell from 110.1 to 103.4, with the Expected Conditions Index falling from 109.8 to 104.7. Both sat below their long-run averages of 108.6 and 112.6 respectively.

Looking at the sub-indexes, consumers appeared to be concerned with the near-term economic outlook, but less concerned over its impact on personal finances.

• The 1-year economic outlook sub-index slid from 4.2 to -15.4, taking it below the long-run average -2.6.
• In contrast, the expected financial situation sub-index increased from 15.5 to 19.9, moving well above the long-run average of 11.3.
• The ‘Good time to Buy’ Index slid from 21.1 to 8.4, however, with concerns over the near-term economic outlook likely to lead to a tightening of the purse strings.
• Looking further down the track, the 5-year economic outlook sub-index remained unchanged at 9.7. It is worth noting, however, that the sub-index continued to sit well below its long-run average of 29.1.

The Kiwi Dollar moved from $0.60524 to $0.60430 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.73% to $0.6089.

For the Aussie Dollar

House prices were on the rise in the 4^th quarter, with the house price index rising by 3.9%, following a 2.4% increase in the 3^rd quarter. Economists had forecast a 3.9% increase.

According to the ABS,

• Price rises in Sydney and Melbourne drove residential prices northwards in the 4^th
• Residential prices increased by 4.7% in Sydney and by 5.2% in Melbourne.
• Darwin was reportedly the only city to see a fall in residential prices in the quarter.
• In the year to the December quarter 2019, residential prices rose by 2.5%, with only Perth and Darwin recording declines in prices.

Monetary Policy

The RBA meeting minutes garnered a greater degree of attention, however, with the markets eager to get a sense of what’s next.

Salient points from the 3^rd March Minutes included,

• Economic activity in the 1^st half of 2020 would be significantly affected by the global response to the coronavirus outbreak.
• It was too early to tell how persistent the impact of the coronavirus would be and at what point economic activity would rebound.
• The Aussie Dollar had depreciated to its lowest level in more than a decade.
• Australia’s financial markets were operating effectively and the RBA would continue to ensure sufficient liquidity in the markets.
• Uncertainty was likely to affect household spending and business investments as well as education, transport, and tourism.
• Members noted that the combined monetary and fiscal responses would help the economy deal with the headwinds posed by COVID-19.
• The Board concluded that an extended period of low interest rates would be required for Australia to reach full employment and achieve the inflation target.
• Looking ahead, the Board also agreed on the importance of monitoring rapid developments and maintaining contact to assess the implications of the virus on the economy.
• The Board was also prepared to ease monetary policy further to support the economy.

The Aussie Dollar moved from $0.61119 to $0.61154 upon release of the stats and minutes. At the time of writing, the Aussie Dollar was up by 0.20% to $0.6129, with no major surprises in the minutes to hit the Aussie.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.81% to ¥106.69 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Economic data includes ZEW Economic Sentiment figures for Germany and the Eurozone and 4^th quarter Eurozone wage growth figures.

Expect the March sentiment figures to have a greater influence from the economic calendar. The March figures will reflect the impact of the coronavirus on economist and analyst sentiment towards the economic outlook.

We would expect any positive numbers to have a muted impact on the EUR, with the outlook towards the Eurozone economy dire for now.

While the ECB’s latest monetary policy move could see outflows from the EUR, the unwind of carry trades is unlikely to abate near-term. There are just too many unknowns to support a drive towards emerging market currencies at present.

At the time of writing, the EUR was down by 0.10% at $1.1172.

For the Pound

It’s a busy day ahead on the economic calendar.  January’s unemployment and wage growth figures are due out along with February claimant counts.

We’ve seen the BoE deliver monetary policy support, with more on the cards as BoE Governor Carney heads for the door.

Any spike in claimant counts and slide in wage growth would certainly be a bad combination. Negative numbers would support another move by the BoE, particularly with other central banks throwing in the kitchen sink.

At the time of writing, the Pound was down by 0.24% to $1.2241.

Across the Pond

It’s a busy day ahead on the U.S economic calendar. February retail sales and industrial production figures are due out along with January’s JOLT’s job openings and business inventories.

Expect retail sales to have the greatest impact, with January’s JOLTs job openings unlikely to reflect the effects of the coronavirus.

When considering the retail sales figures, expect weak numbers to have a greater impact, with sales likely to plummet in March and April.

Outside of the numbers, there’s always the U.S administration there to deliver Dollar weakness…

The Dollar Spot Index was up by 0.07% to 98.141 at the time of writing.

For the Loonie

It’s a relatively busy day ahead on the economic calendar, with manufacturing sales and foreign securities purchases in focus.

The January numbers are unlikely to move the dial, with the coronavirus yet to have shown its teeth at the start of the year.

With the FED slashing rates to zero and spooking the markets, crude oil prices tanked on Monday. Price action added further pressure on the BoC to deliver more…

We’ve seen plenty of emergency moves, the BoC may not be in a position to wait…

The Loonie was up by 0.22% at C$1.3985 against the U.S Dollar, at the time of writing, with early support coming from a rise in crude oil prices.