The Aussie was already showing weakness early on, thanks to the commodities slide that started in yesterday’s U.S. session, as well as the risk-off vibes during the Asian session. However, the Aussie got another beat-down when Australia released a couple of poor economic reports. Meanwhile, the risk-off vibes gave the safe-havens Swissy and yen a bullish boost.
Other noteworthy currencies include the Loonie, which was mostly weaker, very likely because of the slide in oil prices. Another is the Kiwi, since it was able to resist the risk-off vibes and even tried to fight off the Swissy and the yen, probably because of yesterday’s rise in dairy prices and strong PPI numbers.
- Westpac’s Australian consumer sentiment index: -1.1% vs. 0.7% previous
- Australia’s wage price index q/q: 0.5% as expected, 0.4% previous
- Japanese revised industrial production m/m: -1.9% vs. unchanged at -2.1% expected
Poor Australian data
Australia got slapped with two disappointing economic reports earlier today.
The first was the Westpac-Melbourne Institute survey of consumer sentiment, which revealed that the consumer sentiment fell by 1.1% to 98 index points after already falling by 0.7% previously. This is the lowest reading since January of this year.
The other report, which has arguably more weight, was Australia’s quarterly wage growth report. And the report showed that wages in Australia grew by 0.5% quarter-on-quarter in Q1 2017, which is within expectations. However, the reading for Q4 2016 was downgraded from +0.5% to +0.4%.
Year-on-year, wages grew by 1.9% in Q1 2017, which is the same pace as in Q4 and Q3 2016. However, it should be noted that the 1.9% increase is the slowest ever on record. Moreover, CPI grew by 2.1% in Q1 2017, which means that wage growth is falling behind.
Also, if you take wage growth in the context of currently very high household debt in Australia, as well as the RBA’s recent warnings about the housing market, then you get an even more downbeat picture. As the RBA noted in yesterday’s meeting minutes:
“[I]f households were becoming more focused on paying down debt, this would imply some downside risks to the outlook for household consumption growth. A fall in housing prices could also weigh on consumption growth.”
Iron ore climbs higher
Dalian iron ore rose by 3.9% to 474.50 yuan ($69) per dry metric ton today, extending its gains after staging a recovery yesterday.
Market analysts pointed to another rise in Chinese steel prices, thanks to lower steel inventory levels amid China’s crackdown on steel mills, which apparently shows steady underlying demand for steel.
Gloomy mood in Asia-Pacific
Risk aversion was clearly the dominant sentiment in the Asia-Pacific region, given that most equity indices were printing losses.
- Australia’s ASX 200 was down by 0.96% to 5,794.40
- New Zealand’s NZX 50 was up by 0.15% to 7,418.82
- The Shanghai Composite was down by 0.10% to 3,109.83
- Hang Seng was down by 0.18% to 25,289.50
- The Nikkei Index was down by 0.58% to 19,805.00
- KOSPI was down by 0.22% to 2,290.21
Market analysts blamed the risk-off vibes on falling oil prices and jitters over recent political developments in the United States. Australian equities took extra hits, though, thanks apparently to poor wage growth data.
Major Market Mover(s):
The Aussie was already retreating when the Asian session finally rolled around, very likely because of the risk-off vibes and commodities slide, even though iron ore was not part of the slide (interestingly enough).
This was before the Australian economic reports got released. And when the reports finally did get released, the Aussie got hit by another wave of sellers and ended up as the worst-performing currency of the session.
AUD/USD was down by 7 pips (-0.09%) to 0.7422, AUD/CHF was down by 15 pips (-0.21%) to 0.7300,vAUD/USD was down by 25 pips (-0.31%) to 83.53
JPY & CHF
The risk-off mood may have been poison to the higher-yielding Swissy, but that likely sent safe-haven flows towards the yen and the Swissy since both currencies outperformed. And between the two, the yen came out on top as the one currency to rule them all (during this session at least).
USD/JPY was down by 35 pips (-0.31%) to 112.46, EUR/JPY was down by 36 pips (-0.28%) to 124.99, CAD/JPY was down by 33 pips (-0.40%) to 82.74
USD/CHF was down by 16 pips (-0.17%) to 0.9831, CAD/CHF was down by 4 pips (-0.06%) to 0.7232, GBP/CHF was down by 9 pips (-0.07%) to 1.2719
Watch Out For:
- 8:00 am GMT: Italian trade balance (€1.97B expected, €1.88B previous)
- 8:30 am GMT: U.K. average earnings index (2.4% expected, 2.3% previous), claimant count change (25.5K previous), and jobless rate (steady at 4.7% expected)
- 9:00 am GMT: Final headline (no change from 1.9% expected) and core (no change from 1.2% expected) readings for the Euro Zone’s HICP