The JPY weakened again into today's early US session as bonds failed to rally again, the Euro was a notch or two higher due to Greek debt spreads remaining relatively stable and even tightening slightly. The big mover in the early North American session was CAD, which plunged in reaction to a rather negative jobs report, which showed a smaller than expected growth in employment and the unemployment rate still at the 8.2% level. Before this report, some suggested the risk of a post-Olympics hangover, and this may have been the case here, as services payrolls shrank while those for natural resources industries and construction rose.
Meanwhile, late yesterday, the US report a record year on year increase in same store sales to the tune of 9.0%, an easy comparison as US retail activity was troughing from late 2008 an into mid-2009, but still a sign of more confidence from the US consumer.
Reserve Managers have the Commodity Currency Bug?
A quarterly report out from the IMF shows a growing tendency for reserve managers to buy the Australia and Canadian dollars due to their exposure to faster growing emerging market countries. According to a Bloomberg interview with a UBS strategist, the "other currencies" portion of global reserves is mostly these two commodity currencies, and now makes up 3.1% of global reserves, surpassing the JPY's 3.0% (down from 3.2% the previous quarter). This would help to explain the very persistent rallies in AUD and CAD as these currencies would have a hard time absorbing the kind of flows that can come from reserve managers, who are now sitting on $8.1 trillion in reserves. Meanwhile, the Euro's portion of global reserves declined from 27.4% from 27.8% over the last quarter, not exactly a panicky exit from the Euro, but certainly a contributor to the Euro's fall since December.
A quarterly report out from the IMF shows a growing tendency for reserve managers to buy the Australia and Canadian dollars due to their exposure to faster growing emerging market countries. According to a Bloomberg interview with a UBS strategist, the "other currencies" portion of global reserves is mostly these two commodity currencies, and now makes up 3.1% of global reserves, surpassing the JPY's 3.0% (down from 3.2% the previous quarter). This would help to explain the very persistent rallies in AUD and CAD as these currencies would have a hard time absorbing the kind of flows that can come from reserve managers, who are now sitting on $8.1 trillion in reserves. Meanwhile, the Euro's portion of global reserves declined from 27.4% from 27.8% over the last quarter, not exactly a panicky exit from the Euro, but certainly a contributor to the Euro's fall since December.
Chart: GBPUSD
GBPUSD breaking higher here to the highest level since late February and just touching the 55-day moving average today before retreating. Note that this has been an important MA for the pair since at least last December, when the pair last closed above that level.
GBPUSD breaking higher here to the highest level since late February and just touching the 55-day moving average today before retreating. Note that this has been an important MA for the pair since at least last December, when the pair last closed above that level.
CNY reval - implications?
Note the upcoming release of the Chinese Trade Balance number, which could show a deficit for the first time since early 2004. Note that the Chinese trade numbers are not seasonally adjusted and the most significant dips in the surplus have always come in the February/March time frame, but most of the year-on-year comparisons over the last year are showing a weakening terms of trade picture for China, which is importing so many commodities to feed its construction bubble. This obviously has important implications for the yuan, which will experience less pressure to . The latest rumors seem to suggest that the Chinese might try to throw the US congress a bone by allowing a small one-off hop in the yuan before allowing it to revert to the managed float regime of a few years back. Any revaluation may see knee-jerk reactions lower in the commodity currencies and a boost to the JPY due to the fear of it acting as a de facto monetary tightening for China, but longer term, the currency is unlikely to move very quickly, so major currencies elsewhere would likely quickly revert to following trends in rate differentials and risk appetite for direction.
Note the upcoming release of the Chinese Trade Balance number, which could show a deficit for the first time since early 2004. Note that the Chinese trade numbers are not seasonally adjusted and the most significant dips in the surplus have always come in the February/March time frame, but most of the year-on-year comparisons over the last year are showing a weakening terms of trade picture for China, which is importing so many commodities to feed its construction bubble. This obviously has important implications for the yuan, which will experience less pressure to . The latest rumors seem to suggest that the Chinese might try to throw the US congress a bone by allowing a small one-off hop in the yuan before allowing it to revert to the managed float regime of a few years back. Any revaluation may see knee-jerk reactions lower in the commodity currencies and a boost to the JPY due to the fear of it acting as a de facto monetary tightening for China, but longer term, the currency is unlikely to move very quickly, so major currencies elsewhere would likely quickly revert to following trends in rate differentials and risk appetite for direction.
Looking ahead
Nothing of note on the calendar for the rest of the day. Next week is a fairly busy week for US data, including the US Trade Balance, CPI, Retail Sales, and New Home Sales, as well as a virtual parade of Fed officials talking about the US economy, including Mr. Bernanke himself.
Nothing of note on the calendar for the rest of the day. Next week is a fairly busy week for US data, including the US Trade Balance, CPI, Retail Sales, and New Home Sales, as well as a virtual parade of Fed officials talking about the US economy, including Mr. Bernanke himself.
Economic Data Highlights
- Australia Mar. AiG Performance of Construction Index fell to 48.7 from 52.8 in Feb.
- China Q1 Business Climate Index rose to 132.9 from 130.6 in Q4
- Germany Feb. Trade Balance out at +12.6B vs. 11.4B expected and 8.0B in Jan.
- Sweden Feb. Industrial Production out at -0.8% MoM vs. +0.8% expected
- Sweden Feb. Industrial Orders out at -0.9% MoM and +12.5% YoY
- Norway Mar. CPI out at +0.5% MoM vs. +0.6% expected
- Norway Mar. Underlying CPI out at +0.2% MoM vs. +0.4% expected
- Norway Mar. Producer Prices including oil rose +2.3% MoM and +21.7% YoY
- Norway Feb Industrial Product Manufacturing rose +0.8 MoM vs. +0.3% expected
- UK Mar. PPI Input/Output out at +3.6/+0.9% MoM vs. +1.2%/+0.4% expected, respectively
- UK Mar. PPI Output Core rose +0.7% MoM vs. +0.3% expected
- Canada Mar. Net Change in Employment was +17.9k vs. 26k expected
- Canada Mar. Unemployment Rate out at 8.2% vs. 8.1% expected and 8.2% in Feb.
Upcoming Economic Data Highlights
- US Feb. Wholesale Inventories (1400)
- China Mar. Trade Balance (Sat 0400)
- New Zealand Mar. QV House Prices (Sun 1200)
- Japan BoJ Monetary Policy Meeting Minutes (Sun 2350)
- Australia Feb. Home Loans (Mon 0130)
No comments:
Post a Comment