Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“If you get people in a room and if you disclose something that could be perceived to be market-moving to a reasonably select group, then you’ve got to be exceptionally careful”

- Philip Lawlor, a partner at London-based Smith & Williamson Investment

After announcing an acceleration of money printing to boost bond buying before liquidity dries up during Europe’s summer vacation period in July and August, the European Central Bank slowed its weekly pace of purchases. The central bank bought 11.819 billion euros worth of assets in the week ended May 22, marking the smallest increase in three weeks. Under the quantitative easing programme which began in early March, the ECB aims to purchase 60 billion euros a month of bonds, asset-backed securities and covered bonds. The scheme is intended to last till September 2016, or beyond to ensure a sustained adjustment in the inflation path back towards the ECB's 2% target.

Meanwhile, another scandal broke out after one of ECB officials provided high-impact market information to a private audience including major hedge funds before it was made public. ECB executive board member Benoît Coeuré shared fresh details of the central bank's bond-buying stimulus programme that became available to broader audience the next day. Last Monday, Coeuré gave new details of the ECB's bond-purchase plans in a speech that took place following an all-day conference. The ECB said it planned to publish Coeuré's speech at the same time as he gave it, but due to an error it was not released until the following morning. When the speech went public, the Euro tumbled and stocks and bonds soared.

NZD

“The value of whole-milk powder we sent to China is April 2015 was a fifth of the April 2014 value”

- Jason Attewell, Statistics New Zealand

New Zealand trade surplus shrank in April as whole milk powder exports to China fell. According to Statistics New Zealand, the trade surplus was $NZ123 million in the reported month, compared with $NZ100 million expected by economists and $NZ754 million surplus in March. New Zealand logged an annual trade deficit of $NZ2.62 billion, marking the largest deficit since June 2009. Annual exports to China, New Zealand's leading trading partner, plummeted 26% in the year through April to $NZ8.45 billion, largely due to weaker demand for commodities such as whole milk powder. Softer Chinese demand for New Zealand dairy products, coupled with lower international commodity prices and rising import bill weigh on the nation’s trade balance.

Exports of milk powder, butter and cheese, New Zealand's biggest commodity export group, plunged 27% to $NZ888 million in April from the same month a year earlier due to lower quantities for whole milk powder and lower prices overall. Imports in April climbed 2.6% to $NZ4.04 billion from the year earlier. Imports from China surged 8.2% year-on-year, as New Zealand purchased trains from the Asian nation, while imports from the EU soared by 7.8% due to the purchase of an aircraft from France.

JPY

“The latest data point can be interpreted as confirming that underlying inflation in Japan has been improving significantly, although the firmness is currently masked by the temporary negative impact of the sharp decline in oil prices”

- Haruhiko Kuroda, BoJ Governor

Bank of Japan Governor Haruhiko Kuroda said the Japanese economy is now overcoming deflation, offering a more upbeat outlook for the nation’s economy. Thus, the BoJ saw no need of further easing measures to achieve its 2% inflation target. Yet, Kuroda highlighted that the BOJ stood ready to expand stimulus again if the nation’s economy falters and threatens to disrupt the broad uptrend in inflation. Consumer prices are likely to start rising again once the impact from a sharp fall in oil prices starts to fade, Kuroda said.

Meanwhile, Japan slid back into a trade deficit in April, a month after booking its first surplus in almost three years, as the drop in the value of oil imports shrank from the preceding month. The world's third biggest economy logged a 53.4 billion yen deficit, according to the Ministry of Finance. Exports surged 8.0% on year, while imports plunged 4.2%. The ministry said the overall deficit was the narrowest since March 2009. The value of crude oil imports plummeted 34.6% from a year earlier compared with a 51% drop last month, while exports of cars rose only 7.2% on year compared with a 10.5% jump last month. The overall volume of imports climbed 0.1% from a year earlier, while exports surged 1.8%. The government and BoJ are relying on demand from overseas to support stronger growth in the fiscal year through March 2016 after the economy was derailed by the nation’s sales tax hike last year.