Market Roundup
- New Zealand Feb PMI down to 56.0, Jan 58.0.
- New Zealand Feb REINZ median house prices +0.4% m/m, +4.7% y/y.
- New Zealand Feb food prices -0.6% m/m, -0.5% y/y, food prices make up @19% of CPI.
- Japan investment trust outflows in February Y460 bln, 7 ½ year high, money market funds hardest hit on BoJ NIRP - Nikkei.
- Japan Q1 big mfg sentiment index -7.9, Q4 '15 +3.8, Q2 eyed at -3.5, prev est zero, FY '15/16 CAPEX +8.8%, pre vest +7.5%, -6.6% eyed in '16/17.
- PBOC fixes CNY at 6.4905 against USD, strongest this year, spot to 0.6477, strongest intra-day.
- Foreign CB US debt holdings +$3.414 bln to $3.254 trln March 2 week, Treasury holdings +3.659 bln to $2.939 trln, agencies -$368 mln to $266.137 bln.
- NY Fed - Swaps with foreign CBs $95 mln March 2 week, BoJ $10 mln, rest ECB.
- Lipper - Various funds attract good flows, stock funds break nine-week streak of outflows, junk funds also in demand.
Economic Data Ahead
- (0200 ET/0700 GMT) Germany Feb CPI - final, +0.4% m/m, unch y/y eyed; flash +0.4%, unch.
- (0200 ET/0700 GMT) Germany Feb HICP - final, +0.4% m/m, -0.2% y/y eyed; flash +0.4%, -0.2%.
- (0300 ET/0800 GMT) Spain Feb CPI, -0.3% m/m, -0.8% y/y eyed; last -1.9%, -0.3%.
- (0300 ET/0800 GMT) Spain Feb HICP, -0.4% m/m, -0.9% y/y eyed; last -2.5%, -0.9%.
- (0400 ET/0900 GMT) Italy Jan industrial output, +0.6% m/m, +0.5% y/y eyed; last -0.7%, -1.0%.
- (0430 ET/0930 GMT) Great Britain Jan trade balance, GBP10.3 bln deficit eyed; last bln deficit.
- (0430 ET/0930 GMT) Great Britain Jan trade balance - non-EU, GBP2.9 bln def eyed; last bln def.
- (0430 ET/0930 GMT) Great Britain Jan construction output, +0.3% m/m, -1.5% y/y eyed; last +1.5%, +0.5%.
- (0830 ET/1330 GMT) United States Feb export/import prices, -0.5% and -0.6% m/m eyed; last -0.8%, -1.1%.
Key Events Ahead
- N/A UK DMO GBP1.0/1.5/2.0 bln 1/3/6-month treasury bill auctions.
- (0310 ET/0810 GMT) ECB/Finland CB Liikanen speech at Helsinki conference.
- (0345 ET/0845 GMT) Ex-BoE DepGov Bean presents report on UK statistics, press conference.
- (0400 ET/0900 GMT) Austria National Bank press conference on financial institutions.
- (0500 ET/1000 GMT) Italy E1.5-2/3.5-4/1-1.5 bln 0.3/0.95/1.65% 2018/23/32 BTP auctions.
- (0830 ET/1330 GMT) Buba Nagel speech at Mannheim Forum.
FX Beat
USD: The dollar index suffered huge losses on the euro's broad strength, struggling near a 1-month low of 95.939 on Thursday. However, it rebounded 0.5 percent to 96.210 in early Asian trade on Friday. The dollar declined against the yen as the risk mood darkened, falling back to 112.61 yen from a peak of 114.44.
EUR/USD: The euro hovers near a 3-week high on Friday, having climbed from a trough of 1.0822 to a peak of 1.1218 on Thursday. It made huge gains overnight after the ECB suggested that it was done cutting interest rates at the moment. The central bank on Thursday announced a series of easing measures as expected, including an expansion in asset buying and a deeper cut to already negative deposit rates. Draghi's suggestion that the ECB's easing steps may have limits was likely to hurt investor confidence and riskier currencies. The euro initially declined after the ECB cut deposit rates and expanded its bond-buying programme to include corporate debt. However, it rallied after Draghi stated that the central bank had no plans to cut rates any further. Markets will continue to absorb the ECB impact, and await the FOMC decision next week for further cues on the pair. Currently, the pair trades around 1.1165 level, slightly edged down from the high. Immediate support is seen at 1.1128 (Feb 15 Low), while resistance is located at 1.1218 (Previous Session High).
USD/JPY: The dollar is attempting a recovery from the ECB announcements after it declined to a low of 112.61 on Thursday. The safe-haven yen rose against the dollar as equities reacted negatively to the ECB's forward guidance. The dollar was down at 112.61 yen, well off this week's peak of 114.45 hit early on Thursday. It struggles to extend its recovery mode further as the suppressed trading on the Asian markets continue to strengthen the safe-haven demand for the yen. Later in the day, U.S. import/export prices data will be released, however, is expected to have limited impact on the pair. With ECB out of the way, now attention will be on BoJ monetary policy statement due next week. The pair hovers near sessions high of 113.59, after having touched sessions low of 112.75. Immediate support is located at 112.61 (Previous Session High), while resistance is seen at 113.92 (Mar 7 High), break above could take the pair above the 114.00 mark.
AUD/USD: The Australian dollar trades higher at 0.7487 after slipping 0.4 percent on Thursday. However, it is still within reach of an 8-month summit of 0.7527. It was on track for a 0.4 percent gain for the week, having advanced three cents since March 1. Improved risk sentiment on rebounding oil prices strengthened the pair. The Aussie took a breather against its kiwi neighbor at NZ$1.1153, having touched a 5-month peak of NZ$1.1285 on Thursday when the Reserve Bank of New Zealand surprised with an interest rate cut and flagged possibly more. Markets focus now turns towards economic data from China this weekend and RBA's meeting minutes due next week. China will release its industrial production, urban investment and retail sales data on Saturday. The pair made a high of 0.7498 and a low of 0.7446. Immediate resistance is located at 0.7511 (Previous Session High), break above could take the pair to 0.7527 peak. On the downside, support is seen at 0.7412 (Mar 9 Low).
NZD/USD: The New Zealand dollar, which declined after the Reserve Bank of New Zealand surprisingly cut interest rates on Thursday, managed to drift away from a 1-week low of 0.6619. Earlier in the session, the kiwi rose to a high of 0.6699 and currently trades around 0.6685 level. It is still down 1.8 percent so far this week, largely due to the RBNZ's rate cut. Markets now await series of New Zealand economic data and Fed outcome due next week for fresh momentum. Traders are likely to remain bullish on the pair, as it continues to hover towards session's high. On the upside, immediate resistance is located at 0.6707 (Previous session High), break above could take the pair to 0.6729 (Feb 25 High). While on the downside, support is seen at 0.6653 (Session's Low).
USD/CNY: The yuan hit its strongest level against the dollar in 2016 on Friday, touching 6.4877 per dollar in late morning trade, buoyed by the central bank's firmest midpoint this year and the greenback's slide after the European Central Bank suggested it was done cutting rates for the moment. The PBoC set the midpoint rate at 6.4905 per dollar, or 0.34 percent stronger than the previous fix of 6.5127. The onshore yuan hit 6.4866 in late morning trade, its highest level since Dec. 29. Its previous 2016 peak was 6.4880, on Feb. 15, while the offshore yuan was trading 0.03 percent stronger than the onshore spot at 6.4873 per dollar by midday.
Equities Recap
Asia markets were cautious after ECB eased aggressively, however, the central bank suggested it was running out of room to cut interest rates, even if other stimulus options remained.
MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.32 percent, while Shanghai stocks eased 0.8 percent. Taiwan stocks gained 0.5 pct at 8,706.14 points.
Australia's S&P/ASX 200 closed up 0.41 pct at 5,171.20 points, while Nikkei climbed up 0.51 pct at 16,938.87, with Seoul shares edged up 0.17 pct.
Commodities Recap
Gold climbed to a 13-month high on Friday, buoyed by gains in the euro after the ECB signaled it was done cutting interest rates for now. Spot gold rose as far as $1,282.51 an ounce, its strongest since Feb. 3, 2015, and was trading at $1,277.20 by 0237 GMT, up 0.5 percent. U.S. gold for April delivery climbed 0.4 percent to $1,277.60 an ounce, after peaking at $1,287.80.
Oil prices advanced on Friday supported by fresh investment and a strong yuan, which makes fuel cheaper for Chinese importers, however, analysts warned that any price rally was pre-mature as a global glut remained in place. U.S. crude futures were trading at $38.66 a barrel at 0409 GMT, up 82 cents and over 2 percent from their last close. Brent crude futures were at $40.73 a barrel, up 68 cents.
Treasuries Recap
10-year U.S. Treasury yield stood at 1.951 percent versus previous close of 1.929 percent.
Japanese government bond prices dropped on Friday, taking their cue from falls in U.S. and European bonds after ECB suggested that it does not anticipate further deepening of the ECB's rate cuts. Draghi's comments pushed the 10-year U.S. bond yield to a 1-month high of 1.957 percent. June JGB futures, which took over the benchmark status from the March contract on Thursday fell as much as 0.81 point and were last down 0.17 point at 150.94. In the cash bond market, the 10-year bond yield rose 2.0 basis points to minus 0.005 percent while the 20-year bond yield rose 5.5 basis points to 0.545 percent. The 30-year yield rose 4.5 basis points to 0.805 percent.
Australian government bond futures extended losses. The 3-year bond contract shed 3.5 ticks at 97.995, having touched its lowest in two months. The 10-year contract declined 4.75 ticks to 97.3550, while the 20-year contract eased 6.5 ticks to 98.8150.
New Zealand government bonds eased, sending yields 2 basis points higher at the long end of the curve.
Canadian government bond prices were lower across the maturity curve. The benchmark 10-year was down 47 Canadian cents to yield 1.299 percent, while the 2-year price dropped 7.5 Canadian cents to yield 0.566 percent and . The 10-year yield touched its highest since Jan. 22 at 1.336 percent.
