It’s all Eyes on Draghi – Will it be a Wait and See or Panic Stations?

Trade data gives the Aussie Dollar an early boost as the market shift focus towards this afternoon’s ECB press conference.
Bob Mason
Draghiecb sign

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side once more. Key stats were limited to January retail sales and trade data out of Australia.

For the Aussie Dollar,

Retail sales increased by 0.1% in January, month-on-month. Coming up short of a forecasted 0.3% rise, sales partially reversed December’s 0.4% decline. According to figures released by the ABS,

  • Food retailing (+0.3%); Other Retailing (+0.7%); and Cafes, Restaurants and Takeaway Services (+0.3%) reported increases in sales
  • Offsetting the uptick in sales were sales in Department stores (-2.1%); and Clothing, footwear and personal accessories (-0.3%).
  • Household goods retail was flat for the month.

The trade surplus widened from A$3.769bn to A$4.549bn in January. Forecasts were for the trade surplus to narrow to A$2.850bn. According to figures released by the ABS,

  • Goods and services credits increased by A$1,901m (5%) to A$39,937m. The exports of non-monetary gold rose by A$1,373m. There were also increases in the exports of non-rural goods (A$396m) and rural goods (A$97m)
  • Partially offsetting the upside were declines in the exports of goods under merchanting, down by A$12m (33%).
  • Service credits increased by A$46m (+1%).
  • Goods and services debits increased by A$1,121m (+3%) to A$35,388m. The imports of capital goods increased by A$737m (+12%). There were also increases in the imports of consumption goods, which rose by A$483m (+6%) and intermediate and other merchandise goods (A$157m, 1%).
  • Partially offsetting the increases were declines in the imports of non-monetary gold, which fell by A$65m (-13%).
  • The imports of services fell by A$191m (-2%).

The Aussie Dollar moved from $0.70347 to $0.70278 upon release of the figures. At the time of writing, the Aussie Dollar stood at $0.7050, up by 0.26% for the session. While retail sales figures disappointed, a record trade surplus eased immediate concerns over demand.

Elsewhere,

The Japanese Yen stood at ¥111.69 against the U.S Dollar, up by 0.07% for the session. The Kiwi Dollar found some much-needed support, following 2 consecutive days in the red. At the time of writing, the Kiwi Dollar stood at $0.6785, up by 0.24% for the session.

The Day Ahead:

For the EUR

The EUR is in action this afternoon. Economic data scheduled for release later this morning includes the Eurozone’s 3rd estimate GDP numbers for the 4th quarter.

While the focus will be on the GDP numbers, finalized 4th quarter employment change numbers could also provide direction. The market will be looking for any deviation from previous estimates.

Outside of the numbers, the ECB monetary policy decision and proceeding press conference is the EUR’s main event of the day.

Has there been a steadying in the economic indicators for the ECB to avoid having to downwardly revise growth forecasts again? Italy’s struggling, as is Germany and, while the service sector PMI numbers provided some hope, the ECB will need to be mindful of China.

To add to the EUR’s troubles through the day, there could be updates from trade talks between the EU Commission and the U.S administration in Washington.

At the time of writing, the EUR down by 0.02% at $1.1305.

For the Pound

Economic data out of the UK is limited to house price figures. The Pound will likely brush aside the numbers, as the markets look ahead to next week’s meaningful vote on Theresa May’s Brexit deal.

We can expect plenty of chatter through the day as talks on Wednesday failed to deliver an agreement on the Irish backstop issue.

At the time of writing, the Pound was up by 0.05% to $1.3177.

Across the Pond

It’s the calm before the storm for the U.S Dollar. Key stats scheduled for release this afternoon include 4th quarter productivity and unit labor cost numbers, along with the weekly jobless claims figures.

Barring a pickup in the initial jobless claims, the focus will likely be on the unit labor cost figures ahead of tomorrow’s key stats.

Outside of the stats, the latest trade data out of the U.S could get the U.S President’s Twitter account going. Initial trade talks between the U.S and the EU are under way…

At the time of writing, the Dollar Spot Index was up 0.01% to 96.878.

For the Loonie

After a rollercoaster of a day on Wednesday, key stats scheduled for release this afternoon are limited to January building approvals.

Following Wednesday’s BoC decision, the dust may take some time to settle, which will likely see the Loonie largely ignore today’s figures. In the event that crude oil prices move northwards, sensitivity to crude oil prices will also likely be reduced on the day.

The Loonie was down 0.01% to C$1.3443, against the U.S Dollar, at the time of writing.

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