Its Nonfarm Payrolls and Wage Growth Day for the Dollar

Earlier in the Day:

Economic data released through the Asian session this morning was on the heavier side and included New Zealand’s electronic card retail sales figures for February, Japan’s January household spending figures and February’s new loans and inflation numbers out of China.

For the Kiwi Dollar there was some disappointment in the electronic card retail sales, which fell 0.3% in the month of February, following January’s 3.4% increase.

The fall was attributed to a 0.5% all in spending on consumables, which was the first decline for the industry since May of last year. There was also little or no change to sales in the other retail industries.

The Kiwi Dollar moved from $0.72583 to $0.72617 upon release of the figures, before recovering to $0.7281 at the time of writing, up 0.23% through the early part of the day.

Out of Japan, household spending came in well ahead of expectations, with January’s month-on-month spending surging by 2.7%, reversing December’s 2.5% decline, whilst coming in well ahead of a forecasted 0.4% decline. Year-on-year, spending increased by 1.9%, following a 0.1% decline in December, also well ahead of a forecasted 1.1% decline.

There were sizeable increases in spending in Medical Care (+12.5%); Housing (+10.1%) and Fuel, light & water charges (+6.6%), while education saw the largest fall, down 10.4% year-on-year.

While the spending figures were a positive, a 3.3% fall in household income led to a 3.3% fall in disposable income, which continues to be Prime Minister Abe’s major bugbear, leaving the economy to rely heavily on trade.

The Japanese Yen eased from ¥106.371 to ¥106.416 against the Dollar, with the markets holding out for the BoJ monetary policy decision.

Economic data out of China was mixed this morning, with new loans rising by CNY839.3bn, falling short of a forecasted CNY900bn and January’s CNY2,900bn, while consumer price inflation jumped in February. Month-on-month, consumer prices rose by 1.2%, following January’s 0.6%, with the annual rate of inflation surging to 2.9% from January’s 1.5%. In contrast, wholesale price inflation eased from January’s 4.3% to 3.7% in February.

Following January’s record CNY2,900bn in loan issuances, there had been an expectation for there to be a sizeable decline in February, with the PBoC clamping down ahead of the National People’s Congress that is taking place this week.

For the Japanese Yen, the Bank of Japan left monetary policy unchanged and gave no guidance on when there will be a shift in policy. The bank voted 8:1 in favour of maintaining the around 0% target for 10-year Japanese government bond yields and -0.1% short-term deposit rates. The Bank of Japan also maintained its target of buying government bonds at an annual rate of ¥80tn.

The Japanese Yen moved from ¥106.674 to $106.616 against the Dollar upon release of the policy statement, before pulling back to ¥106.72 at the time of writing, down 0.46% on the day.

In the equity markets, there were gains across the majors at the time of writing, with the Nikkei and ASX200 ending the day with gains of 0.47% and 0.34% respectively, while the Hang Seng and CSI300 were up 1.03% and 0.59% respectively at the time of writing. The implementation of trade tariffs had little impact on market sentiment this morning, with the markets moving on to focus on Trump’s planned meeting with North Korea’s Kim Jong Un.

The Day Ahead:

For the EUR, Economic data out of the Eurozone is limited to Germany’s industrial and trade figures this morning, which are forecasted to be EUR positive, though how responsive the EUR will be remains to be seen, with the more dovish than expected Draghi still echoing across the markets.

It’s certainly been a choppy March for the EUR, which has jumped from an end of February $1.2194 to Wednesday’s $1.2411 close before easing back to $1.2318 at the time of writing, up just 0.05% against the Dollar this morning.

For the Pound, economic data out of the UK this morning includes manufacturing and industrial production figures and trade data for January. With the stats forecasted to be sterling positive, we will expect some support for the Pound early in the day, ahead of the NIESR GDP Estimate release this afternoon, which is expected to be Sterling negative and likely to offset any upside in the Pound from the morning numbers.

At the time of writing, the Pound was down 0.01% to $1.3809, with direction through the day not only hinged on today’s data, but also Brexit chatter, which has become somewhat bearish for the Pound of late.

Across the Pond, its nonfarm payrolls and wage growth and the markets are fully aware of what’s at stake. Another jump in wage growth and solid payroll numbers and the chances of a 4^th rate hike for the year increases.

Forecasts are pointing to a slight slowing in wage growth, compared with January’s 0.3%, while an additional 200k jobs are forecasted to be added. Softer wage growth numbers would pin back any material gains in the Dollar, with any revisions to January’s payroll numbers also an influence this afternoon.

We’ve seen the markets move on from sheer panic over trade tariffs, so next on the agenda is Trump’s meeting with the North Korean leader before the summer and whether more tariffs will be introduced in the weeks ahead.

At the time of writing, the Dollar Spot Index was down 0.03% to 90.155, with the Oval Office and today’s stats the key drivers through the day.

Across the border, stats out of Canada this afternoon include employment figures, which are skewed in favour of the Loonie, based on forecasts.

The Canadian Dollar certainly breathed a sigh of relief on Thursday, with Canada’s exemption from the steel and aluminium trade tariffs, but it’s not going to be the end of the story, with the NAFTA trade agreement now needing addressing from Trump’s perspective.

At the time of writing, the Loonie was up 0.05% to C$1.2889 against the U.S Dollar, with today’s stats and how the markets view Canada’s prospects in negotiating favourable trade terms the key drivers for the day.