Trump, Inflation and the USD in Focus, with an Eye on the Pound

Earlier in the Day:

Economic data released through the Asian session this morning included February’s building consents out of New Zealand, Japan’s February retail sales figures and February private sector credit numbers out of Australia.

For the Kiwi Dollar, building consents jumped by 5.7% in February, dwarfing January’s 0.2% rise. According to figures released by Statistics NZ, consents for apartments surged by 29.2% in the 12-months to February, with townhouses, flats and units jumping by 12%, while consents for houses fell by 1.3%. Over 12-months to February 2018 consents for new homes increased by 3.6%.

The Kiwi Dollar moved from $0.72102 to $0.72055, before moving to $0.7206, down 0.08% for the session.

For the Japanese Yen, February retail sales increased by 1.6% year-on-year, falling short of a forecasted 1.7% rise, whilst seeing an uptick from January’s 1.5%.

The uptick was attributed to a 2.3% increase in spending on food and drinks, year-on-year, improving on January’s 2% rise, with the sales of clothes recovering from January’s 0.3% fall, up 0.3% year-on-year in February.

Pinning back the headline number, car sales slid up 2.1%, with the sale of electronics up 4.6%, easing from January’s 5.2% year-on-year increase.

A tightening labour market and hopes of a bigger increase in wages next month would support consumer spending and ultimately lead to a pickup in inflation, with a stronger consumer spending environment certainly key to Japan’s future economic outlook. At present, the economy continues to rely on trade and, with the U.S on a trade war path, the need to get all cylinders firing will be needed to avoid a slowdown in the coming quarters, the recent rise in the Yen certainly not providing favourable trade terms.

The Japanese Yen moved from ¥106.876 to ¥106.774 upon release of the figures, before moving to ¥106.51 at the time of writing, up 0.32% against the Dollar for the session, partially reversing Wednesday’s 1.43% slide.

For the Aussie Dollar, private sector credit increased by 0.4% in February, month-on-month, coming in ahead of a forecasted and January 0.3% rise.

Concerns over a tightening credit environment, following some soft numbers in recent months, left the Aussie Dollar relatively unresponsive to the figures, moving from $0.76539 to $0.76542 upon release, before recovering to $0.7675 at the time of writing, up 0.17%% at the time of writing.

In the equity markets, it was a mixed bag, with the Nikkei down 0.03% ahead of the close, giving up earlier gains that had been supported by the pickup in retail sales, while the Hang Seng and CSI300 recovered from early losses, up 0.04% and 0.73% respectively at the time of writing. The ASX200 closed out the day with a 0.52% slide going into the Easter break.

The Day Ahead:

For the EUR, stats out of the Eurozone this morning are limited Germany’s March unemployment and prelim inflation figures.

Following some disappointing consumer confidence numbers out of the Eurozone on Wednesday that contributed to a 0.77% slide for the day, the markets will be looking for some positives. Germany’s unemployment figures would provide some support, if in line with or better than forecasts, while prelim inflation figures will likely have a greater impact, as chatter begins to focus on ECB interest rate policy.

At the time of writing, the EUR was up 0.20% to $1.2333, with today’s stats and sentiment towards this afternoon’s inflation figures out of the U.S and any noise from the Oval Office the key drivers through the day,

Following a quiet first half of the week, things heat up for the Pound, with economic data out of the UK this morning including finalized 4^th quarter GDP, current account and business investment numbers.

After last week’s hawkish hold on monetary policy, coupled with a more optimistic outlook towards Brexit, we will expect the Pound to respond to this morning’s figures, in-line with or better than forecasted likely to be a positive for the Pound.

At the time of writing, the Pound was up 0.12% to $1.4094, pulling back from Monday’s $1.4229 March high, the slide coming off the back of a resurgent U.S Dollar and an unimpressive CBI Distributive Trades Survey for March, which came in at -8 compared with a forecasted +7 on Wednesday.

Across the Pond, key stats out of the U.S include the FED’s preferred core PCE price index together with personal spending figures for February, along with the weekly jobless claims, Chicago’s March PMI and finalized March consumer sentiment numbers.

Focus will primarily be inflation figures, the markets looking for any reason for the FED to upwardly revise its rate hike projections for the current year, though we will expect the rest of the figures to play a hand in the direction of the U.S Dollar this afternoon.

It goes without saying that sentiment to the Dollar will also be influenced by any noise from Capitol Hill through the U.S session.

At the time of writing, the Dollar Spot Index was down 0.15% to 89.921, easing back from Wednesday’s 0.77% bounce.

Across the border, the Loonie is also in action this afternoon, with January GDP and February RPMI figures scheduled for release.

Based on forecasts, the numbers are Loonie negative, though the markets will likely be forward looking, the hopes of a favourable end to NAFTA trade talks the positive, with current crude oil price levels also supporting, with the Loonie up 0.11% to C$1.2909 against the U.S Dollar.