News and views
Equities are modestly fi rmer, currencies little changed, and commodities are lower. US wholesale inventories fell, but the equity market focused more on the detail which said companies’ sales rose. The S&P500 is up 0.4%, just shy of its one year high (set in Jan) and banks are 2.1% higher. The CRB commodities index is down 0.4% (oil a notable exception at +0.1%), copper -1.4%, and gold -1.3%. US treasuries are 2-3bp higher in yield, but were even weaker prior to the 10yr auction which was well bid by all measures.
The US dollar is little changed since the previous NY close at around 80.50, but did spike to 80.85 early Europe, and dip to 80.30 in NY. The spike was likely a EUR feature, it falling from 1.3600 to 1.3545 on a weaker German current account, but gaining after that to 1.3680. UK IP was also weak, and GBP fell from 1.4980 to 1.4873 before recovering to 1.4990. USD/JPY climbed throughout the evening sessions, from 90.00 to 90.80.
AUD ground slightly higher from 0.9140 to 0.9193 (last seen on 20 Jan), falling in NY to 0.9127.
NZD outperformed the majors and rose to 0.7098, pulling back to 0.7050 in NY. AUD/NZD moved lower to 1.2930, as cross-holders bailed ahead of the RBNZ.
US wholesale inventories fall 0.2% in Jan. This followed a revised 1.0% fall in Dec, and suggests recent inventory rebuilding momentum (it was a big driver of Q4 GDP growth) may be waning, despite low inventory to sale ratios.
Japanese machinery orders fell 3.7% in Jan. That is a respectable follow up to the 20.1% gain in Dec. Equipment spending is fi nding a base globally, as the investment share of activity recovers from historically low levels. Orders from manufacturers rose 3.3% while orders non-manufacturing fi rms fell 12.9%, consistent with the gulf between the PMI readings recording by the two sectors globally.
UK industrial production fell 0.4% in Jan, much weaker than expected though consistent with yesterday’s news that exports fell sharply in January. Weather may have had a negative impact. This continues the run of weak Jan offi cial data stretching across the labour market, retailing, factories and the external sector, which adds to risk that Q1 GDP fails to grow.
Outlook
AUD/USD and NZD/USD outlook next 24 hours: Key event risks today are Australian employment, and the RBNZ’s MPS. AUD’s uptrend since Feb remains intact, but today’s pair of event risks will set AUD direction for the day given the market’s focus on the AUD/NZD cross at present. Minor resistance is at 0.9190, but should that break, there’s nothing until 0.9330; minor support is at 0.9120. NZD needs to sustain a break above 0.7080 to escape its sideways range since Feb.
