Market Preview – Apr 4th to 10th

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The Week Ahead: It was yet another strong performance for the AUD last week and this was driven by both offshore and local developments. Whilst most talk recently has been around the global environment and the AUD strength largely being a factor of general USD weakness, domestic data also played its part. Manufacturing data released late last week showed the ninth consecutive month of growth in Australia with the latest PMI figure showing the highest level in almost 12 years. Of significance within this data was the movement by the machinery and equipment sub-sector from contraction to expansion for the first time since 2012.
The AUD has opened the week above 0.7660 USD and this is almost 12% above the currency pair’s low-point in January. This mini-surge by the AUD will likely impact manufacturing numbers in coming months and could challenge some local manufacturers according to the Australian Industry Group.
It is a busy week for Australian data and announcements with most jam-packed into the early part of the week. Inflation, building approvals, retail sales and job advertisements data kick-off the week on Monday before trade balance data and the RBA meeting takes place on Tuesday. We are anticipating that the April meeting will again result in a “rates on hold” outcome and that this could provide some short-term support for the AUD. As always the accompanying rate statement will make an interesting read and it is possible that there could again be mention of a preference for a softer AUD. The performance of the AUD in aftermath of the RBA announcement will be interesting to watch as will the contents of RBA Assistant Governor Kent’s speech on Wednesday. Whilst this speech is largely due to focus upon economic forecasting it will be interesting to note if any “personal views” on the AUD are presented.
Across the Tasman in New Zealand the NZD has continued its recent run of strength nudging a 12-month high against the USD. Many local banks in New Zealand have started to adjust their NZD forecasts higher following this recent trend. The strengthening kiwi is comntinuing to take its toll on the country’s farmers and manufacturing sector. Commodity price data and the GlobalDairyTrade Auction results will be eagerly anticipated at the front end of the week .
The greenback’s performance was largely muted last week with US Fed Chair Yellen’s speech serving to temper market expectations of imminent rate rises. Non-farm payrolls data released late last week made for interesting reading yet again. The headline figure of 215k new jobs in isolation looked strong however this incorporated a decline of 29k manufacturing jobs (the biggest monthly decline in almost 7 years) whilst a stronger homebuilding sector increased  by 37k jobs. The participation rate increased last month and this also impacted the unemployment rate as it edged back up to 5%.
The minutes form the most recent FOMC meeting will be released midweek and will be scoured for any hint fo forward guidance as to timing of interest rate movements. The June meeting is still a live possibility and will be dependent upon the data in the leadup. Fed Chair Yellen will be participating in a panel discussion in New York later in the week with a number of other Fed and FOMC members scheduled to speak across the week.
Chinese manufacturing data released last week also edged above the growth line for the first time in 9 months. Whilst a surprise and only marginally positive the news was received well by global markets as it exceeded expectations. Talk of increased steel output is however causing waves in other parts of the world with fears that possible dumping could further damage the weak global economic prospects. British steel producers in particular are anxious at this latest development.
British construction data kicks off the week in the UK with Services PMI another important release on Tuesday. House price data follows on Thursday ahead of manufacturing and industrial production data on Friday. European investror coinfidence and unemployment figures start the economic week in the euro zone with retail sales and services PMI data following on Tuesday. The ECB Monetary Policy Meeting Accounts should, however spark the most interest on Thiursday prior to ECB President Draghi’s speech in the early hours of Friday morning (AEST).
Regards All.
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