AUD tumbles on weak inflation

Market Brief

The latest batch of economic data from the US came in mostly on the soft side yesterday, casting a shadow over the country’s economic outlook. Durable orders rebounded less than expected in March, suggesting that the contraction in the factory sector is not over. The indicator rose 0.8%m/m in March, missing median forecasts of 1.9%, while the previous month’s reading was downwardly revised to 3.1%. After stripping out demand for transportation goods, new orders shrank -0.2% versus an expected increase of 0.5%. On the release, EUR/USD jumped 0.60% to 1.1340 before consolidating at around 1.13 amid a slight improvement in both the Composite and Service PMIs. The first printed at 51.7 in April from 51.3 in March, while the latter rose to 52.1 from 51.3. The bottom line is that we do not yet have a clear sign of recovery yet as most US sectors continue to surprise significantly to the downside. The Fed’s statement will therefore emphasise the weak US outlook.

With the exception of the Australian dollar, which was literally hammered, it was a relatively quiet trading session in Asia with most G10 currencies trading sideways. AUD/USD fell 2% to 0.76 after headline inflation collapsed to the lowest level since the fourth quarter of 2008, printing at -0.2% versus +0.2% expected. Core inflation (excluding the most volatile components) printed at +0.2% versus 0.5% expected, down from 0.6% in the previous quarter. We expect the Aussie to continue moving lower as sellers rush to the market and push the Australian dollar lower in anticipation that the Reserve Bank of Australia will step in and lower its key interest rate in an attempt to boost inflation.

In New Zealand, the trade balance came in on the soft side, printing at NZ$117m versus NZ$401m median forecast, as exports fell more than expected. The slump in the values of primary produce exports has widened the annual trade deficit. The export of dairy products shrank another 12.2% in March after a contraction of 5.7% in the previous month. Similarly, meat products’ exports fell 10.9% after a negative figure of 8.3% in February. Only crude oil prices and fruits export values increased over the period and helped to limit the damage. Indeed, this is the largest trade deficit since April 2009. In such an environment, NZD/USD fell 0.50% in Wellington. Moreover, tonight’s RBNZ’s rate decision will likely serve to remind investors of the central bank’s continued dovish bias and that it does not look favourably upon the recent Kiwi appreciation.

Today traders will be watching retails sales from Spain; the economic tendency survey and trade balance from Sweden; consumer confidence, business confidence and economic sentiment from Italy; GDP figures from the UK; MBA mortgage application, pending home sales and FOMC rate decision from the US; RBNZ rate decision and Brazil rate decision.

Global Indexes	Current Level	% Change
Nikkei 225 Index	17290.49	-0.36
Hang Seng Index	21364.79	-0.2
Shanghai Index	2953.671	-0.37
FTSE futures	6230.5	-0.15
DAX futures	10326	0.24
SMI Futures	8046	0.12
S&P future	2082.2	-0.3

 

Global Indexes	Current Level	% Change
Gold	1246.6	0.25
Silver	17.33	0.96
VIX	13.96	-0.85
Crude wti	44.58	1.23
USD Index	94.33	-0.26

 

Today's Calendar	Estimates	Previous	Country/GMT
SP Mar Retail Sales YoY	-	7,40%	EUR/07:00
SP Mar Retail Sales SA YoY	3,40%	3,90%	EUR/07:00
SP Feb Total Mortgage Lending YoY	-	15,40%	EUR/07:00
SP Feb House Mortgage Approvals YoY	-	10,60%	EUR/07:00
UK BOE FPC Member Kohn Speaks in Frankfurt	-	-	GBP/07:00
SW Apr Consumer Confidence	99	99,7	SEK/07:00
SW Apr Manufacturing Confidence s.a.	111,7	112,5	SEK/07:00
SW Apr Economic Tendency Survey	106,1	106,6	SEK/07:00
SW Mar Trade Balance	1.7b	-0.2b	SEK/07:30
SW Mar Household Lending YoY	-	7,50%	SEK/07:30
SW LO Union Economic Forecasts	-	-	SEK/07:30
EC Mar M3 Money Supply YoY	5,00%	5,00%	EUR/08:00
IT Apr Consumer Confidence Index	115	115	EUR/08:00
IT Apr Business Confidence	102,5	102,2	EUR/08:00
IT Apr Economic Sentiment	-	100,1	EUR/08:00
BZ Apr 22 FIPE CPI - Weekly	0,65%	0,75%	BRL/08:00
UK 1Q A GDP QoQ	0,40%	0,60%	GBP/08:30
UK 1Q A GDP YoY	2,00%	2,10%	GBP/08:30
UK Feb Index of Services MoM	0,20%	0,20%	GBP/08:30
UK Feb Index of Services 3M/3M	0,80%	0,90%	GBP/08:30
RU Bank of Russia 1st Dep. Governor Shvetsov participates in MoEx	-	-	RUB/09:00
UK Apr CBI Retailing Reported Sales	13	7	GBP/10:00
UK Apr CBI Total Dist. Reported Sales	-	20	GBP/10:00
US Apr 22 MBA Mortgage Applications	-	1,30%	USD/11:00
US Mar Advance Goods Trade Balance	-$62.8b	-$62.9b	USD/12:30
RU Apr 25 CPI Weekly YTD	-	2,40%	RUB/13:00
RU Apr 25 CPI WoW	-	0,20%	RUB/13:00
US Mar Pending Home Sales MoM	0,50%	3,50%	USD/14:00
US Mar Pending Home Sales NSA YoY	0,80%	5,10%	USD/14:00
US Apr 22 DOE U.S. Crude Oil Inventories	1750k	2080k	USD/14:30
US Apr 22 DOE Cushing OK Crude Inventory	235k	-248k	USD/14:30
BZ Currency Flows Weekly	-	-	BRL/15:30
US Apr 27 FOMC Rate Decision (Upper Bound)	0,50%	0,50%	USD/18:00
US Apr 27 FOMC Rate Decision (Lower Bound)	0,25%	0,25%	USD/18:00
US Federal Open Market Committee Announces Decision on Rates	-	-	USD/18:00
NZ Apr 28 RBNZ Official Cash Rate	2,25%	2,25%	NZD/21:00
BZ Apr 27 Selic Rate	14,25%	14,25%	BRL/20:00
IN Mar Eight Infrastructure Industries	-	5,70%	INR/22:00

 

 

Currency Tech

EURUSD
R 2: 1.1714
R 1: 1.1465
CURRENT: 1.1326
S 1: 1.1144
S 2: 1.1058

GBPUSD
R 2: 1.4959
R 1: 1.4668
CURRENT: 1.4609
S 1: 1.4284
S 2: 1.4132

USDJPY
R 2: 113.80
R 1: 112.68
CURRENT: 111.79
S 1: 107.63
S 2: 105.23

USDCHF
R 2: 1.0093
R 1: 0.9913
CURRENT: 0.9718
S 1: 0.9476
S 2: 0.9259

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot