Daily Report: Dollar Rally Stalls, Swissy and Yen Mildly Lower
Dollar's recovery against Euro stalls in Asian today and is waiting for new momentum. On the one hand, investors are cautious ahead of this week's EU summit on Friday, where leaders are expected to nail down a comprehensive package to tackle the debt crisis in long term. However, there are some concerns that no concrete results would be out of the meeting. Meanwhile, oil price also stabilizes at around 104 level after OPEC refrained from pumping more output after yesterday's meeting. On the other hand, Euro is still supported by rate expectations. ECB Governing Council member Weber said that he "wouldn't do anything here to try to correct market expectations" where three quarter-point hikes are priced in.
Swiss Franc and yen are mildly lower today as risk aversion eases. S&P 500 rose 0.89% overnight and is followed by strength is Asian equities. Retreat in oil price helps like stocks in general. Data from Japan was positive with machinery orders rose 4.2% mom, 5.9% yoy in January. That's the strongest reading in five months and is viewed as a signal that companies are boosting spending as global recovery strengthens. Nevertheless, Aussie is soft after data showed consumer confidence dropped -2.4% in March while home loans dropped -4.5% in January.
Looking ahead, Swiss CPI is expected to rise 0.3% mom, 0.4% yoy in February. UK trade deficit is expected to narrow to GBP -8.5b in January. Germany industrial production is expected to rise 1.7% mom in January. Canada new housing price index is expected to rise 0.1% mom in January while US wholesale inventories are expected to rise 1.0%.
The RBNZ will very likely reduce its OCR from 3.00% in the coming Asian session. We expect a cut of -25 bps is appropriate though policymakers will state further easing cannot be ruled out depending on how economic data evolve. Prime Minister revealed his preference on a rate cut as the earthquake in Christchurch on February 22 will trim the country's economic growth this year. The market has fully priced in a -25 bps cut and bets for a -50 bps cut have been rising.
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