Market Review for March 13, 2018

It’s all about inflation today as the markets continue to flip flop on the outlook towards FED monetary policy. Elsewhere, economic sentiment figures out of Germany will provide direction for the EUR, with the Spring Forecast there for the Pound, though Brexit chatter will overshadow.

It was another relative quiet day on the data front, with economic data released through the Asian session limited to new home loan and business confidence figures out of Australia and Japan’s Tertiary Industry Activity Index.

For the Aussie Dollar,Home loans fell by 1.1% in January, following December’s 2.3% decline, which was worse than a forecasted 0.1% fall. In spite of the decline, the value of loans increased by 0.7%, with owner occupied homes loans rising by 0.5% and investment housing fixed loans rising by 1.1%, according to figures released by the ABS. NAB Business Confidence slipped from 12 to 9 in February, which was in line with expectations.

The Aussie Dollar moved from $0.78741 to $0.78771 upon release of the data, with the Aussie Dollar sitting at $0.7874 at the time of writing, up 0.01% for the day.

 For the Japanese Yen, the tertiary industry activity index slipped by 0.6% in January, following December’s 0.2% decline. The fall was larger than forecasted, raising further concerns over the Japanese economy at the start of the 1st quarter.

Industries that were major contributors to the decline included wholesale trade (-4.1%); medical, healthcare and welfare (-1.7%); retail trade (-1.4%), while some of the gains were partially offset by a 1.4% increase in living and amusement-related services sector activity, with finance and insurance, information and communication, real estate and transport and postal services also seeing increased activity, though relatively minor.

The Yen moved from ¥106.643 to ¥106.721 against the Dollar, upon release of the figures, with the yen finding strong support on Monday, as news hit the wires of Japan’s finance minister allegedly altering records of a discounted sale of state-owned land to a school operator linked to Prime Minister Abe’s wife. At the time of writing, the Yen was in reverse however, down 0.30% to ¥106.74 against the Dollar.

Elsewhere, the Kiwi Dollar was up 0.38% to $0.7324 at the time of writing, with the softer U.S Dollar continuing to support ahead of 4th quarter current account numbers tomorrow and 4th quarter GDP numbers out of New Zealand, scheduled for release on Thursday.

In the equity markets, there was plenty of red this morning, with the majors going into reverse ahead of this afternoon’s inflation figures out of the U.S.

The ASX200 closed out the day down 0.36%, with the Hang Seng and CSI300 down 0.19% and 0.34% respectively at the time of writing, while the Nikkei recovered from early losses, up 0.35% ahead of the close, in what has been a choppy session.

Following a quiet start to the week, economic data out of the Eurozone this morning includes finalized February inflation figures out of Spain, French non-farm payrolls for the 4th quarter and Germany and the Eurozone’s March economic sentiment figures for March.

Barring any material deviation on the finalized inflation figures, Germany’s economic sentiment figures will be key, as Merkel looks ahead to being sworn in tomorrow for her 4th term as Germany’s chancellor.

At the time of writing, the EUR was down 0.06% to $1.2318, with today’s stats the key driver, with both the EUR and Dollar facing selling pressure as a result of the recent shift in sentiment towards monetary policy. How Trump moves on tariffs on European cars would certainly be a consideration for Draghi and the team, with the EU having responded with vigour to Trump’s car tariff suggestions.

For the Pound, while it’s another quiet day on the data front, with no material stats scheduled for release, the Chancellor’s Spring Statement at lunch time will be watched closely, though influence on the Pound may be limited as the markets look towards the Brexit negotiating table to gauge how bruised Britain will be on its way out of the EU. There are certainly plenty of disagreements on key issues including trade, so the volatility in the Pound is unlikely to subside anytime soon.

At the time of writing, the Pound was down 0.11% to $1.3891, with U.S inflation, the Spring Statement and Brexit chatter the key drivers for the day.

Across the Pound, economic data scheduled for release includes February’s inflation figures this afternoon. Following the softer wage growth figures last Friday, the markets have been as quick to price out a 4th rate hike as they were to price it in. This afternoon’s inflation figures will likely have a similar impact, with any uptick in core annual rate of inflation from 1.8% likely to drive the Dollar and hit the equity markets.

Forecast are for the headline annual rate of inflation to ease to 2.1%, with core inflation to hold steady at 1.8%.

At the time of writing, the Dollar Spot Index was up 0.13% to 90.013, with everything hanging on today’s stats, though rising prospects of a trade war with China and the EU in particular won’t help the cause for the Dollar bulls.
Oil prices dipped on Tuesday, extending losses from the previous session, as the inexorable rise in U.S. crude output weighed on markets.

U.S. West Texas Intermediate (WTI) crude futures were at $61.18 a barrel at 0747 GMT, down 18 cents, or 0.3 percent, from their previous close.

Brent crude futures were at $64.77 per barrel, down 18 cents, or 0.3 percent.

 Both crude benchmarks dropped by around 1 percent in their Monday sessions.

Oil prices fell on the back of concerns that surging U.S. production ... could push inventories in the U.S. higher.

 Healthy demand and ongoing supply restraint by a group or producers led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, however, are preventing further price falls.

But in a sign that an early-year rally in crude oil has fizzled out, money managers cut their combined net long positions in the six most important futures and options contracts linked to petroleum prices by 50 million barrels in the week to March 6.

Scaring off traders betting on further price increases has been a relentless rise in U.S. crude oil production, which soared past 10 million barrels per day (bpd) in late 2017, overtaking output by top exporter Saudi Arabia.

U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).

View our full economic calendar for a daily roundup of major economic events.


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