Focus Shifts to GBP, with Retail Sales and the BoE in the Spotlight

A mixed morning for the Kiwi and Aussie Dollar shifts focus to the BoJ and BoE who deliver policy decisions, though neither are likely to deliver a shock.
Bob Mason
Further Monetary Easing by Bank Of England?
Further Monetary Easing by Bank Of England?

Earlier in the Day:

Economic data released through the Asian session this morning included 3rd quarter GDP numbers and November trade data out of New Zealand and November employment figures out of Australia. Outside of the stats, the BoJ monetary policy decision is due out later this morning, with BoJ Governor Kuroda scheduled to speak at the BoJ press conference. Out of China, there could be more updates from the CEWC that could also provide direction through the day.

For the Kiwi Dollar,

The economy grew by 0.3% in the 3rd quarter, the slowest growth rate since Dec-13, according to figures released by NZ Stats, with growth coming up short of a forecasted 0.6% and a 2nd quarter 1.00%,

  • 11 of the 16 industries recorded higher production in the 3rd quarter, with primary industries growing by 2.2%, whilst service industries slowed to 0.5%.
  • Goods producing industries saw growth fall by 1%, weighing on the GDP number for the quarter, with manufacturing and food manufacturing being attributed to the contraction in the sector.
  • On the upside, within the primary industries, mining (+12%) and forestry and logging led growth through the quarter, whilst agriculture weighed.
  • Looking at the 5 components of the economy, 4 components saw increases, these being household spending, government, investment and exports, whilst imports dragged.

On the trade data, the annual trade deficit narrowed from NZ$5,790m to NZ$5,420m, according to NZ Stats.

  • Total goods imports stood at NZ$63bn, with total goods exports standing at NZ$57.5bn.
  • Monthly goods imports were little changed from November 2017, down just NZ$36m (0.6%) to NZ$5.8bn, the largest fall coming in passenger motor cars, down NZ$178m (35%) from November 2017.
  • Monthly goods exports were up NZ$326m (7.1%) from November 2017 to NZ$4.9bn, the largest contribution coming from the exports of aluminium and beef.
  • The largest increase in exports to NZ’s key markets was to China (NZ$220m) and the U.S (NZ$96m).
  • The monthly trade deficit narrowed from NZ$1,317m to NZ$861m.

The Kiwi Dollar moved from $0.68044 to $0.67661 upon release of the data, before rising to $0.6777 at the time of writing, a gain of 0.15% for the session.

For the Aussie Dollar, November labour figures were mixed in the early part of the Asian session, according to the ABS,

  • The number of employed rose by 37.0k in November, coming in well ahead of a forecasted 20k increase, following October’s 32.8k rise.
  • Full employment fell by 6.4k in the month, following a 42.3k increase in October.
  • The unemployment rate rose from an October and forecasted 5.0% to 5.1% in November, with the participation rate rising from 65.5% to 65.7%, contributing to the rise in the unemployment rate.
  • Part-time employment increased by 43,400, reversing an October 9.5k fall.
  • Year-on-year, full-time employment has increased by 182.2k, while part-time employment has risen by just 105.5.

The Aussie Dollar moved from $0.71104 to $0.71181 upon release of the figures, before rising to $0.7122 at the time of writing, a gain of 0.18% for the session.

Elsewhere, the Japanese Yen, the Japanese Yen stood at ¥112.52, a loss of 0.04% for the session, with the BoJ monetary policy decision not expected to delivery any surprises later in the session, leaving policy divergence in favour of the Dollar.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the day, leaving the markets to respond to the FOMC economic projections released on Wednesday and the interest rate hike.

On the political front, the final agreement between the Italian coalition government and Brussels will be a positive, though we can expect focus to shift towards the economic outlook and what was essentially a hawkish FED Chair on Wednesday, in spite of fewer rate hikes projected for next year.

At the time of writing, the EUR was up 0.08% to $1.1385, with sentiment towards monetary policy and the economic outlook being the key drivers today.

For the Pound, it’s a big day ahead, with key stats scheduled for release including November retail sales figures that are due out ahead of the BoE’s December monetary policy decision, which will be accompanied by a more influential set of minutes, the BoE unlikely to make a move today, with Brexit uncertainty continuing to linger.

While we can expect the Pound to respond to the minutes and the vote count, in event that there is some descent, any updates on Brexit or chatter from Parliament could overshadow the data and the BoE later today.

At the time of writing, the Pound up 0.10% to $1.2623, with today’s stats, the BoE and chatter from Parliament the key drivers today.

Across the Pond, economic data scheduled for release includes the weekly jobless claims figures and manufacturing numbers out of Philly.

Following a disappointing set of numbers out of NY State earlier in the week, the Dollar could take another hit should the numbers be in line with or worse than forecasted, with the FED’s increased focus on the stats making the Dollar all the more sensitive to the numbers.

At the time of writing, the Dollar Spot Index was down 0.04% to 96.999.

For the Loonie, stats are limited to October wholesale sales figures, which will provide some direction for the Loonie, though it still boils down to sentiment towards BoC policy near-term and the direction of oil prices on the BoC’s outlook, with today’s numbers needing to be particularly strong to nudge the Loonie.

The Loonie was up 0.04% to C$1.3479 against the U.S Dollar at the time of writing.

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