NZD flies on retail sales surprise stunner!!
The NZD opened strongly on Friday morning as traders looked to cover short positions ahead of retail sales data. This helped the currency clear the previous high of 0.7313 en route to 0.7323 before settling back to around 0.7310 ahead of the release. A much stronger than expected retail sales number saw the NZD jump 40 points to a 23 month high of 0.7350 and interest rates sell off by 8-10bps with the 2 year swap rate now above 8% for the first time since 1998. Overnight the bullish sentiment continued with the NZD posting a new high of 0.7380, and this morning we open even higher around 0.7390 with the focus now clearly on Q1 CPI data out on Wednesday this week.
AUD reaches 16 year high
A combination of buoyant commodity prices, M&A flows and a weaker USD have all contributed towards a stronger AUD with the currency pair climbing four cents in the past month. On Friday it reached a 16 year high of 0.8331 and went a little higher overnight before pulling back to spend the rest of the session washing around a 0.8310 to 0.8330 range, with the market reluctant to push higher.
G7 statement sees no change
USD/JPY opened around 119.00 on Friday and came under selling pressure just before midday as news of a large Asian property transaction hit the wires. Stop loss levels were taken out at 118.80 and the pair continued to slide to an intraday low of 118.20. In contrast the euro and GBP were both well bid during the local session. Offshore trading saw EUR/USD trade through stop loss levels at both 1.3530 and 1.3550 and the currency eventually peaked at 1.3555. The euro??™s fortunes were helped as an ECB member was quoted as saying that the eurozone can absorb a hard landing in the US. The outcome of the weekend??™s G7 was unexciting with no change in the statements currency section. Elsewhere USD/JPY recovered from its lows to push to a high of 119.58 as the G7 disregarded recent JPY weakness.
US consumer sentiment falls 3.1pts to 85.3 in Apr. The preliminary read on consumer sentiment from the UoM was a steeper fall than the consensus was expecting, although the IBD-TIPP sentiment measure released earlier this week did warn that sentiment was eroding. In both measures, the decline was led by a deteriorating assessment of the economic outlook ??“ hardly surprising given all the recession talk of the last month (misplaced in Westpac??™s view!). The UoM report also found higher inflation expectations, a function of the recent renewed rise in gasoline prices.
US producer prices jump 1.0% in Mar. The PPI was boosted by an 8.7% surge in energy and a 1.4% rise in food (the fourth month in a row above 1%) but elsewhere factory gate prices were mostly subdued ??“ hence the flat core rate. That corrected for the above trend 0.4% rise in Feb, with swings in light truck prices continuing to be a dominating factor. Further up the production line, core crude prices posted a very large rise, nearly 8% in the month, reflecting the recent surge in non energy commodity prices.
US trade deficit $58.4bn in Feb. The trade deficit narrowed even more than we expected, due to a sharp fall in the volume of oil imports (down from 418mn barrels to just 332mn). Slightly lower average prices also helped. Those factors pulled down imports enough to offset the slump on the export side, which was broadbased outside of autos and food. Excluding oil, the deficit actually rose $3bn! With import prices surging in March, and oil import volumes sure to correct from Feb??™s abnormal low, the deficit is set to widen sharply, to perhaps as high as $63bn.
Canadian trade surplus C$4.8bn in Feb. Weak US energy imports in Feb did not show up in the Canadian data, where exports of energy and exports to the US both grew. Even so, the Canadian trade surplus narrowed by $1bn, mainly due to weaker automotive and industrial exports.
Euroland industrial production up 0.6% in Feb. The industrial sector bounced back in February but so far this year it has failed to build upon the solid IP momentum we saw in Q4 last year.