Article Highlights

  • NZ Westpac consumer sentiment up from 108.0 to 113.1
  • NZ building consents up by 2.6% in October vs. -0.2% in September
  • NZ ANZ business confidence up from 20.5 to 21.7 in December
  • Japan’s trade surplus up from 0.47T JPY to 0.54T JPY in November
  • Fitch and Moody’s confirm Australia’s AAA rating
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The Greenback took a couple of steps back against its higher-yielding counterparts, as a few Asian session traders took profits ahead of the holidays.

Major Events:

Australia’s mid-year budget update – The Australian dollar was spared a bloodbath today as Treasurer Scott Morrison’s mid-year budget update just avoided a downgrade from ratings agencies.

In a speech earlier today, Morrison shared that an additional 10.3B AUD is expected to weigh deficit further over the next four years. Deficit in the year starting July 1, 2017 is now forecast at 28.7B AUD, up from 26.1B AUD in May. Despite that, the government is expecting to reach balance by 2021.

Morrison and his team also made changes to their economic forecasts. Inflation is now expected to reach 1.75% in 2016-17, down from its 2.0% expectations in May and below the RBA’s 2% – 3% target range. Unemployment was mostly unchanged at 5.5% from 2016 through 2018 though forward estimates of 2017-18 was revised to 5.25%.

Economic growth estimates also saw downgrades. GDP is now forecasted to hit 2.0%, remain at 2.75% in 2017-18 before picking up to 3.0% in 2018 -19. If you recall, back in May the government had pegged GDP at 2.5% in 2016-17 and 3.0% in 2017-18.

Critics argue that it won’t be long before Australia loses its prized triple As, as a lot of the government’s “zombie” savings measures aren’t expected to clear Parliament. Still, credit ratings agencies Moody’s and Fitch reaffirmed their AAA ratings in favor of giving the government a chance to meet its targets.

Japan’s trade data – Japan recorded a 153B JPY trade surplus in November, its third consecutive monthly surplus in a row as imports fell faster than exports. It’s much better than the 387B JPY deficit from a year earlier but just missed expectations of a 227.4B JPY surplus.

A closer look tells us that imports fell by 8.8% from a year earlier following a 17% drop in October. Meanwhile, exports clocked in its 14th consecutive drop with -0.4%, though it missed estimates of a 2.2% decline.

Overall, the numbers support speculations that the weak yen is giving Japanese exporters a boost. Exports declined at its slowest pace since September 2015 while exports to China, Japan’s largest trading partner, rose for the first time since February.

Major Market Movers:

USD – Positive reports from Australia and Japan deterred forex bulls away from the dollar this time around.

EUR/USD is up by 19 pips (+0.18%) to 1.0459, USD/JPY slipped by 39 pips (-0.33%) to 117.57, and USD/CHF dipped by 10 pips (-0.10%) to 1.0257.

JPY – A bit of profit-taking ahead of the BOJ’s monetary policy decision dragged most of the yen crosses today.

GBP/JPY fell by 49 pips (-0.33%) to 146.75, EUR/JPY dropped by 21 pips (-0.17%) to 122.96, and AUD/JPY slipped by 15 pips (-0.18%) to 85.80.

AUD – The Aussie got a bit of a lift from Australia keeping its AAA rating after the government’s budget update.

AUD/USD shot up by 12 pips (+0.17%) to .7298, GBP/AUD fell by 39 pips (-0.23%) to 1.7102, and AUD/CAD inched 19 pips higher (+0.20%) to .9734.

Watch Out For:

  • 10:00 am GMT: German IfO business climate (110.7 expected, 110.4 previous)
  • 12:00 pm GMT: German BuBa monthly report

See also:

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Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

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