There were tons of market-moving data during the Asian session, which is probably why forex traders showed minimal reaction to the POTUS’ first address.
- Japan’s preliminary industrial production rises by 2.7% vs. 1.5% expected, 0.5% previous
- U.K.’s BRC shop price index (y/y) slips by 0.5% vs. 0.6% decline in December
- U.K.’s GfK consumer confidence up from -13 to -9 in January
- Australia’s inflation maintains 0.6% growth in Q4 2017
- Australia’s trimmed mean CPI steadies at 0.4% vs. 0.5% expected, 0.4% previous
- China’s manufacturing PMI slips from 51.3 vs. 51.5 expected, 51.6 previous
- China’s non-manufacturing PMI up from 55.0 to 55.3 in January
Busy day for the BOJ
The yen stumbled a bit after the Bank of Japan (BOJ) increased its purchases of government bonds maturing in 3-5 years from 300B JPY to 330B JPY. However, it did maintain its buying levels steady for bonds that will mature in 1-3 years, 10-25 years, and 25-40 years.
The move came at the heels of 10-year JGB yields rising to a six-and-a-half month high of 0.095% last Tuesday, which was a hair’s breadth away from the 0.11% level that market players were watching.
For newbies out there, you should know that the central bank has pledged to drag 10-year yields to “around zero percent.”
Meanwhile, a summary of opinions on the last monetary policy meeting showed that members still believe that “it is necessary to pursue the current powerful monetary easing,” and that “it is not favorable to let market expectations regarding the adjustment of monetary easing heighten at an early stage.”
However, at least one member thinks that the economy and prices will improve going forward, enough for the BOJ to “consider adjustment of the level of interest rates.”
Australia’s Q4 2017 CPI report
The biggest story of early Asian session trading is Australia’s inflation report missing its expectations.
Data from the Land Down Under showed consumer prices rising by 0.6% in Q4 2017, which matches Q3’s growth but missed expectations of a 0.7% uptick. This translates to an annualized gain of 1.9% following Q3’s 1.8% growth and against estimates of a 2.0% increase.
RBA trimmed mean CPI – RBA’s more favored indicator – printed a 1.8% annualized growth (vs. 1.9% expected) while RBA’s weighted mean CPI clocked in at 2.0% as expected and is faster than Q3’s 1.9% growth.
Apparently, automotive fuel (+10.4%), tobacco (+8.5%), and holiday travel and accommodation (+6.3%) led the gains, while audio visual and computing equipment (-3.5%), international holiday travel and accommodation (-1.7%), and telecommunication equipment and services (-1.4%) saw price decreases.
Overall, the report quashed expectations of any near-term interest rate hike from the RBA. After all, the 1.9% annual growth may be above the RBA’s 2017 inflation forecasts of 1.75%, but it’s still below the central bank’s 2% – 3% target range.
China’s PMI reports
Reports from the world’s second largest economy saw both mixed results from the manufacturing and services industries.
China’s official manufacturing PMI came in at 51.3 in January, which is lower than December’s 51.6 and the expected 51.5 readings. Details reveal that both new orders and output saw dips compared to the previous month.
Meanwhile, China’s official non-manufacturing PMI rose from 55.0 to 55.3 in January, with a key index for services rising from 53.4 to 54.4 offsetting a pullback (from 63.9 to 60.5) in the construction sector.
Trump’s State of the Union address
That’s a wrap! A few hours earlier the Donald concluded his first ever State of the Union address.
As expected, the POTUS touted improvements in the labor and stock markets, as well as the positive impact of his latest tax bill and geopolitical campaigns.
What caught the market players’ attention were his remarks over trade, infrastructure, and military program efforts.
Trump says we should expect “trading relationships to be fair and, very importantly, reciprocal,” adding that “We will work to fix bad trade deals and negotiate new ones and they’ll be good ones.”
The Donald also says he will “permanently fix the infrastructure deficit” by partnering with State and local governments as well as the private sector to build “gleaming new roads, bridges, highways, railways, and waterways” across the land.
Last but definitely not the least, Trump cited “rogue regimes, terrorist groups, and rivals like China and Russia” as reasons for bigger spending on “nuclear arsenal” and military efforts.
Trump’s speech didn’t get a lot of reaction from the Asian session crowd, though. The dollar only took a few steps back as risk appetite continued to reign supreme during the trading session.
Major Market Mover(s):
Not surprisingly, the CPI miss took its toll on the Aussie and dragged it lower against its major counterparts.
AUD/USD is down by 4 pips (-0.05%) to .8076;
AUD/CAD is down by 14 pips (-0.14% to .9945;
AUD/NZD is down by 67 pips (-0.61%) to 1.0954, and
EUR/AUD is up by 39 pips (+0.25%) to 1.5380.
Despite a lack of major catalysts, the New Zealand dollar was one of the stronger performers during the session.
One possible reason is ratings agency Standard and Poor’s affirming New Zealand’s “AA” rating, though the exodus from the Aussie to its closely-related Kiwi might have also factored in the price action.
NZD/USD is up by 53 pips (+0.72%) to .7379;
NZD/JPY is up by 60 pips (+0.75%) to 80.34;
NZD/CAD is up by 43 pips (+0.47%) to .9083, and
EUR/NZD is down by 69 pips (-0.41%) to 1.6847.
The pound extended its rallies from the previous session where BOE Governor Mark Carney not only passed a jawboning opportunity, but also talked bullish about the economy.
GBP/USD is up by 30 pips (+0.21%) to 1.4174;
GBP/JPY is up by 48 pips (+0.31%) to 154.33, and
GBP/CHF is up by 26 pips (+0.19%) to 1.3240.
The low-yielding yen failed to gain momentum thanks to a one-two punch of overall risk appetite and the BOJ rising its bond-buying game today.
USD/JPY is up by 11 pips (+0.10%) to 108.88;
EUR/JPY is up by 35 pips (+0.26%) to 135.25, and
CHF/JPY gained 20 pips (+0.17%) to 116.56.
Watch Out For:
- 5:00 am GMT: Japan’s consumer confidence (44.9 expected, 44.7 previous)
- 5:00 am GMT: Japan’s housing starts (y/y) (1.1% expected, -0.4% previous)
- 7:00 am GMT: Switzerland’s UBS consumption indicator
- 7:00 am GMT: Germany’s retail sales (-0.3% expected, 2.3% previous)
- 7:45 am GMT: France’s preliminary CPI (-0.3% expected, 0.3% previous)
- 8:00 am GMT: Spain’s flash CPI (y/y) (0.9% expected, 1.1% previous)
- 8:55 am GMT: Germany’s unemployment change (-16K expected, -29K previous)
- 9:00 am GMT: Italy’s unemployment rate (10.9% expected, 11.0% previous)
- 10:00 am GMT: Euro Zone’s CPI flash estimate (y/y) (1.3% expected, 1.4% previous)
- 10:00 am GMT: Euro Zone’s core CPI flash estimate (y/y) (1.0% expected, 0.9% previous)
- 10:00 am GMT: Euro Zone unemployment rate to remain at 8.7%?