Market Drivers February 6, 2014
AU Retail Sales, Trade Balance all beat sending Aussie
towards 9000
ECB/BoE on tap
Nikkei -0.18% Europe .92%
Oil $97/bbl
Gold $1258/oz.
Europe and Asia:
AU Retail Sales 0.5% vs. 0.5%
AU Trade Balance 0.47B vs. -0.27B
EUR Retail PMI 50.5 vs. 47.7
North America:
GBP BoE 7:00 AM
EUR ECB 7:45 AM
USD Weekly jobless 8:30 AM
USD Trade Balance 8:30 AM
It’s been a sleepy night of trade in the currency market
with major happy to trace out narrow ranges ahead of the ECB and BOE meetings
later in the day. The one standout today was the Aussie which rose almost to
the key 9000 barrier on good Retail Sales and surprising Trade surplus data.
Australian Retail Sales printed as expected at 0.5% versus
0.5% eyed suggesting that consumer demand remains steady. Retail sales have now
recorded six consecutive month over month increases indicating the RBA’s quick
pivot to an easy monetary policy may have stabilized demand.
More surprisingly and perhaps even more importantly
Australian Trade Balance registered a small surplus of 0.47B versus
expectations of a deficit of -0.27B. The month’s prior data was also revised upward
to a small surplus of 0.08B. Australia has now recorded two straight month of
positive trade balances after running deficits for most of 2012 and 2013. The
improvement in terms of trade was
highly positive given the RBA keen focus on that factor and suggests
that Australia is now able to compete effectively at current exchange rate
levels.
The Aussie jumped higher in reaction to the news but the
rally ran out of steam ahead of the key .9000 figure in morning Asian trade.
Still the pair remains well bid and looks to extend its recovery through
the.9000 level sometime in the near future as sentiment towards the unit has
improved markedly. Not only has the RBA signaled that it is moving from and
easing to a neutral bias, but not some analysts suggest that the central bank
may begin to t may ighten by the end of this year. Such change of policy should
keep the Aussie well supported and barring any sudden economic shocks, the pair
looks to have made solid bottom at the 8650 level.
In Europe meantime, both the euro and pound tread water
ahead of the central bank meetings today. Cable has been slightly weaker in the
aftermath of yesterday’s softer than forecast PMI Services results. As we
pointed out earlier in the week, although UK economy continues to enjoy some of
the fastest growth in the G-7 universe, its rate of acceleration had declined
and as such eased some of the pressure on the BoE to tighten monetary policy in
the near term. Today the the Boe is not expected to make any changes, although
the markets will look for more details and clarity at next week’s BoE inflation
report.
As to the ECB, there is no consensus on what the central
bank may do. No doubt the EZ region continues to see disinflationary pressures
and consumer demand remains woefully weak. On the other hand PMI data shows a
slight pick up in activity that may hint at a possible rebound in the periphery
economies, as well as a modest improvement in France. Given such a landscape
the ECB may prefer to wait on any new policy initiatives and simply reiterate
its forward guidance. If however, the central bank does surprise with a rate
cut, the euro is likely to plunge lower in a knee jerk reaction and could test
the 1.3400 figure as the day proceeds.