Private Sector PMIs, Retail Sales and the Bank of Canada Look to Distract the Markets

Earlier in the Day:

It was a busy day on the Asian economic calendar this morning. The New Zealand Dollar, Aussie Dollar, and the Japanese Yen were in action, with economic data also out of China.

For the Kiwi Dollar

Building consents slid by 2% in January, month-on-month, partially reversing a 9.8% jump in December, according to NZ Stats. Economists had forecast a 0.9% decline.

The Kiwi Dollar moved from $0.62773 to $0.62745 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.21% to $0.6288.

For the Japanese Yen

The Finalized Services PMI came in at 46.8, which was revised up from a prelim 46.7. In January, the Services PMI had stood at 51.0.

According to the Markit Survey,

• Business activity fell at the sharpest pace since April 2014, weighed by a heavy fall in demand attributed to the coronavirus.
• Demand for services fell at the steepest pace in eight-and-a-half years, with Tourism highlighted as a major factor.
• While domestic demand was particularly dire, demand from overseas fell at the fastest pace in two-and-a-half years.
• As a result of a lack of new business, the rate of depletion of outstanding work was the most marked since September 2012.
• Optimism also deteriorated to sit at its weakest in just over three-and-a-half years.
• The only positive from the survey was a continued rise in service sector employment.

The Japanese Yen moved from ¥107.163 to ¥107.265 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.18% to ¥107.32 against the U.S Dollar.

For the Aussie Dollar

There was some much-needed good news, though likely to be temporary.

The economy grew by 0.5% in the 4^th quarter, which was up from 0.4% in the 3^rd quarter. Economists had forecast quarterly growth of 0.3%. Year-on-year, the economy grew by 2.2%, which was up from 1.7% in the 3^rd quarter. Economists had forecast a GDP of 1.9%.

According to the ABS,

• Domestic demand remained subdued with 0.1% growth in the 4^th A pickup in household discretionary spending and further rises in the provision of government services were dampened by falls in dwelling and private business investment.
• Dwelling investments fell by 3.4%, marking a 6^th consecutive quarterly decline.
• The Mining industry provided support, with growth in production volumes of 1.6%, strengthening through the year to 7.3%.
• Falling prices for key export commodities impacted the terms of trade, which fell 5.3%.

The Aussie Dollar moved from $0.65876 to $0.66067 upon release of the figures that preceded China’s Services PMI. At the time of writing, the Aussie Dollar was up by 0.38% to $0.6609.

Out of China

The Caixin Services PMI tumbled from 51.8 to a record low 26.5 in February.

According to the latest survey,

• There were record falls in total new work and export sales as the coronavirus led to a record drop in business activity.
• Restrictions implement to prevent the spread of the virus led to company closures and travel restrictions, weighing on sector activity.
• Firms also noted the effect of the restrictions on the ability to source workers, leading to a slide in staffing levels. The rate of decline in employment was the most marked since the survey began in 2005.
• Due to the slide in staffing levels, backlogs rose.
• Travel restrictions also led to a sharp deterioration in supply chains.
• Business confidence was also impacted, falling to a survey low.

The Aussie Dollar moved from $0.65986 to $0.65932 upon release of the figures.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include Services PMI numbers for Spain and Italy and retail sales figures out of Germany and the Eurozone.

Finalized PMI numbers for France, Germany and the Eurozone are also in focus.

We would expect the retail sales and the Eurozone’s composite figures to have the greatest impact. Any upside in the numbers will likely have a limited impact, however. February retail sales and March PMI numbers are likely to paint a very different picture.

Outside of the numbers expect news updates on the coronavirus to continue to garner attention. Key, however, will be any chatter on monetary and fiscal policy.

We’ve seen the RBA and FED deliver. While the likes of Germany are unlikely to make a move, the ECB is expected to follow suit…

At the time of writing, the EUR was down by 0.03% at $1.1170.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. February’s finalized Services PMI is due out this afternoon.

Expect any upward revisions to have a limited impact on the Pound as the markets look towards the BoE for a rate cut.

Speaking on Tuesday to lawmakers, Carney noted that it is reasonable to expect a response that reflects a combination of fiscal measures and central bank initiatives.

Carney did note, however, that the Monetary Policy Committee will make a move at the appropriate time. That suggests some pause, which should provide some support as other central banks make a move.

On the geopolitical front, there is also Brexit chatter to consider on the day.

At the time of writing, the Pound was up by 0.08% to $1.2821.

Across the Pond

It’s a relatively busy day ahead on the U.S economic calendar.

Key stats include the market’s preferred ISM Non-Manufacturing PMI and the Markit’s finalized Services PMI. Expect the ISM number to have the greatest impact.

February’s ADP Nonfarm Employment Change figures will also be in focus.

Following some disappointing PMI numbers, weak employment figures ahead of Friday’s government numbers would certainly spook the markets.

The good news is that the FED delivered with speed and there is the talk of fiscal support. While the stats will influence today, following Tuesday’s rate cut, the news wires will also garner plenty of attention.

A pickup in the rate of infection in the U.S will test investor sentiment.

The Dollar Spot Index was up by 0.04% to 97.196 at the time of writing.

For the Loonie

It’s a busy day ahead on the economic calendar. While economic data is limited to 4^th quarter labor productivity figures, the Bank of Canada is in action later today.

Expect the labor productivity numbers to have a muted impact as the markets look to 2^nd guess the BoC’s move.

While economists have forecast a hold on rates, the FED’s emergency rate cut on Tuesday may leave the BoC with little choice but to cut.

The government will likely need to also deliver support through fiscal measures, assuming that the BoC makes a move later today.

There was some good news for the Loonie overnight, as OPEC agreed on supply cuts to support price stability.

The Loonie was up by 0.20% at C$1.3353 against the U.S Dollar, at the time of writing.