Daily Market Analysis by HotForex

[HotForex]

Macro Events and News

FX News Today

German Retail Sales Fall: Retail sales in Germany (excluding autos and fuel sales) fell unexpectedly in February into negative territory (-0.4%) missing expectations (0.3%) and significantly below Januarys 0.7% which was the first positive figure since August 2015 and now appears something of anomaly. More evidence of weakness from the consumer and the faltering overall economic activity in Germany.

Japanese Housing Picks Up: Japan’s housing starts rose 7.8% y/y in February after the 0.2% gain in January and confounding expectations of a 2.8% drop. This was the fastest monthly rise since August 2015 when it increased 8.8%. Total Housing starts were 974,000 compared to 876,000 in January. Construction orders fell 12.4% y/y in February following the 13.8% fall in January. Overall activity in Japan’s housing market remains subdued despite these figures and continued aggressive BoJ easing.

US ADP private payrolls increased 200k in March: The rise for February was 205k (revised down from 214k). The service sector climbed 191k, while goods producing jobs edged up 9k. Jobs in trade, transport area rose 42k. Construction jobs increased 17k, while manufacturing added 3k. Professional business services oriented employment increased 28k, while financial accounting firms added 14k. The data was a little better than expected and continues to reflect a healthy labour market.

German HICP inflation rose to 0.1% y/y in March, more than expected and lifting the headline rate back into positive territory, after the -0.1% y/y rate in February. Belgian numbers, released earlier yesterday also moved higher and the data is likely to set the stage for a rebound in the overall Eurozone headline rate this month, with base effects playing a role. For now this should at least limit speculation about further action from Draghi and the use of helicopter money, especially after Coeure suggested that the latter is an interesting academic option, but not actively considered as a policy tool at the moment.



Main Macro Events Today

• German Unemployment

Ongoing economic expansion has been underpinning labour markets and German jobless rates are at very low levels, but the pace of the decline is starting to wane as growth slows down and uncertainty about the global outlook picks up. For now though the improving trend continues and we expect a renewed dip in the German jobless number of -3K (med -5K) in March, which should leave the jobless rate steady at a very low 6.2%.

• Eurozone Inflation

Yesterday’s higher than expected German inflation number is likely to set the stage for today’s round of preliminary HICP readings from France, Spain, Italy and for the Eurozone overall, and we have lifted our forecast for overall EMU HICP to 0.0% (med -0.1%) from -0.1% y/y, with an upside bias. The fall back in the headline rate to -0.2% y/y last month provided the official justification for Draghi’s latest round of easing measures, and a rise out of negative territory should at least for now dampen speculation of Draghi’s next steps and give the ECB time to concentrate on implementing what already has been announced. It also backs our view that the risk of a real deflationary spiral remains limited, despite negative headline rates. Still, Draghi’s hectic activism means markets have gotten used to immediately looking for the next step and speculation of additional measures won’t be stopped by one move higher in the headline rate.

 

[HotForex]

The Economic Week Ahead

Main Macro Events This Week

United States: Fedspeak and the FOMC minutes will highlight a light calendar. FOMC minutes March 17, 18 highlight (Wednesday). At that meeting, policymakers had many uncertain and conflicting signals with which to contend. And in the end the decision was to punt. Fedspeak will be very interesting this week, Chair Yellen (Thursday) all 4 voting Presidents and 3 non-voting Presidents all have speeches scheduled this week. Fundamentals this week include: the March ISM nonmanufacturing report and February international trade, along with February JOLTS (all Tuesday) factory orders for February (Today), the Markit services PMI (Tuesday), weekly jobless claims and February consumer credit (Thursday), and wholesale trade (Friday).

Canada: A narrowing is seen in the February trade deficit (Tuesday) to -C$0.4 bln from -C$0.7 bln in January, with exports growing 1.5% m/m after the 1.0% gain in January. An improvement in the March Ivey PMI to 55.0 on a seasonally adjusted basis is anticipated (Wednesday) from 53.4 in February. February building permits (Thursday) are expected to rise 3.0% after the 9.8% drop in January. A pull-back to 205.0k in March is projected for housing starts (Friday) from the 212.6k growth rate in February. A 10.0k rebound in employment (Friday) is seen for March following the 2.3k slip in February and 5.7k decline in January. A steady 7.3% for the unemployment rate is anticipated. Bank of Canada Governor Poloz and Senior Deputy Governor Wilkins will speak (Monday) and Wilkins also has a speech on Tuesday.

Europe: Risk aversion has picked up again in the Eurozone and fresh pressure on European stock markets will keep pressure on Draghi to do even more to support the economy, especially as inflation remains stuck in negative territory. Data releases focus on German orders and production data, Manufacturing orders (Tuesday), are expected to decline, Industrial production (Thursday) is expected to have also corrected in February after the strong start to the year. ECB minutes are published (Thursday). Eurozone Services and Composite PMIs (Wednesday) expected at 54.0, producer price inflation, which is seen falling further into negative territory and retail sales (Tuesday) are expected to rise 0.1% m/m (median same), after 0.4% m/m in January. Germany has trade data on Friday and France production numbers on the same day.

UK: Sterling markets will start the new week in a worried state after Friday’s weak March manufacturing PMI survey caused a steep decline in the GBP. Tuesday’s release of the services PMI survey with economic growth mostly reliant on the big service sector, and after an unexpectedly weak showing in February, which at 52.7 was the worst reading since March 2013. The construction PMI is also due (Today), expected at 54.1 in March, which would be almost unchanged from 54.2 in the prior month.

February industrial production numbers are also due (Friday), expected to ebb to 0.1% m/m growth (median same) after a 0.3% m/m rise in January, and fall to 0.0% in the y/y comparison, compared to 0.2%. February trade numbers (also Friday) are expected to show the visible goods deficit come in at GBP 10.1 bln, near unchanged from the GBP 10.3 deficit seen in January.

China: The economic calendar is light this week. March services PMI on Wednesday, which is expected to rise to 51.5 from 51.2. March foreign direct investment (Friday) is seen up 2.0% y/y from the 1.8% increase in January.

Japan: The first economic releases come on Wednesday, with the preliminary February leading and coincident indices. The former is seen down 0.5% m/m versus the prior -0.4%, while the latter is expected up 2.8% m/m from 2.9% in January. The February current account surplus (Friday) is expected to widen to JPY 2,100 bln from 520.8 bln in January. March consumer confidence (Friday) is forecast to improve to 40.1 from the prior 40.1.

Australia: The Reserve Bank of Australia is expected to maintain the current 2.00% rate setting (Tuesday), however, the data for Building Approvals, (better than expected) Retail Sales (worse) and March ANZ job ads (also worse) have been released overnight and have increased pressure on the RBA to act on rates, causing a fall in the AUD. The trade deficit (Tuesday) is projected at -A$2.8 bln in February from -A$2.9 bln in January. RBA Assistant Governor (Economic) Kent speaks on Economic Forecasting at the Reserve Bank of Australia (Wednesday).

 

[HotForex]

Macro Events and News

FX News Today

RBA leaves rates on hold: The Reserve Bank of Australia has left interest rates on hold for the 11th straight month, despite growing unease about a stubbornly high Australian dollar. The official overnight cash rate target has been left at 2 per cent, where it has been since last being cut in May 2015. The Reserve Bank has attempted to lift expectations that the bank may cut rates, with its governor Glenn Stevens warning that a rising Australian dollar could push it to cutting rates again. “The Australian dollar has appreciated somewhat recently. In part, this reflects some increase in commodity prices, but monetary developments elsewhere in the world have also played a role,” he wrote in his post-meeting statement. Financial markets are pricing in around a one-in-three chance of rates falling next month, with a 50 per cent chance of a cut by August. AUDUSD is currently trading at 0.7600, having been as high as 0.7620.

European Outlook: Asian stock markets outside of mainland China were under pressure, with the Nikkei underperforming. US and European stock futures are also lower, as risk aversion continues to weigh on markets and oil prices settle below USD 36 per barrel. The RBA kept policy on hold, but left the door open for easing steps as it sends a warning on the strong AUD. The RBI cut rates by 25 bp, also as expected. The European calendar has German manufacturing orders at the start of the session, followed by the final reading of the Eurozone Services PMI and the UK. Services PMI.

Minneapolis Fed’s Kashkari sees moderate growth: As his outlook for the U.S. economy and views current monetary policy as “about right.” He also noted that it is compelling that the U.S. labor force participation rate is on the rise as he wants to keep putting people back to work as long as inflation stays below the Fed’s goal. “That’s a good thing and we should let that process continue while inflation is running below our target,” he noted. Sounds like he’ll be in Yellen’s dovish camp, barring any unexpected jump in inflation. A little less controversial than the his start as a regional Fed president by critiquing banks for still being too big to fail. Kashkari was speaking at a symposium on banking regulation.

US factory orders dropped 1.7% in February: After a revised 1.2% January gain (was 1.6%). Though the headline decline wasn’t as weak as projected, weakness was broad-based and this doesn’t bode well for growth. Durable goods were revised down to a 3.0% decline from -2.8% previously. Transportation orders fell 6.2%. Excluding transportation, orders were down 1.3% compared to a 1.4% gain previously (revised from 1.7%). Nondefense capital goods orders excluding aircraft slid 2.5% from 3.3 (revised from a 3.4% increase). Shipments dropped 0.7%, with nondefense capital goods shipments excluding aircraft falling 1.7% from -1.4% (revised from -0.4%). Inventories declined 0.4% from -0.5% in January. The inventory-shipment ratio was steady at 1.37 (January was revised up from 1.36).



Main Macro Events Today

• U.S. Non-Manufacturing ISM

The March ISM-NMI is out later today to close out the March producer sentiment readings. We expect the headline to improve to 54.0 (median 54.1) from 53.4 in February The already released ISM improved to 51.8 from 49.5 and other major measures all improved as well. Broadly, we expect the ISM-adjusted measure of all measures to pop to 52 for the month after holding at 49 in the two months prior.

• Eurozone Services PMI

The Eurozone PMI Services PMI is also released today and no change to previous months 53.7 reading is expected. German figures are expected to remain resilient at 55.5 whilst French figures are expected to remain the weakest of the reporting countries at 51.2.

 

[HotForex]

Final Eurozone PMI – Below Expectations

EURJPY, 4 Hour,

Eurozone final services PMI revised down to 53.1 from 54.0 reported initially and versus 53.3 in February. The composite was revised up to 53.1 from 53.0 reported initially on the back of the stronger manufacturing number, but this still leaves the index down from 53.7 in the previous month. So the improvement in confidence that the PMI suggested for the end of the first quarter looks shakier than thought and the country breakdown highlights that even the big four are drifting apart again, with the weakness mainly felt at the core. France in particular continues to underperform amid the lack of structural reforms.

EURJPY continued its decline from Fridays high to the psychological 125.50 level and the 4 Hour 200 Day MA. The JPY has been particularly strong over night as risk off takes hold. There was also a meeting convened between the BOJ, the Japanese finance ministry and the financial regulator, following the meeting Chief Cabinet Secretary Suga said FX levels were being watched with “a sense of urgency”.

 

[HotForex]

Macro News and Events

FX News Today

German Feb industrial production drops less than feared: Production correcting just 0.5% m/m from the rise in January, against expectations for a drop of around -2.0% m/m. Still, the January number was revised sharply down to 2.3% m/m from 3.3% m/m reported initially and the annual rate fell back in February. Together with the weaker than expected orders readings and mixed confidence data the outlook is for slowing growth in overall production and a general weakening of the growth trajectory as the improvement on the labour market peters out and the refugee crisis weighs on consumer confidence.

European Outlook: Asian stock markets were mixed with Japan underperforming as a third consecutive dip in the leading indicator and a stronger Yen weighed on markets. Elsewhere stock markets started to stabilize and the front end Nymex futures climbed toward USD 37 per barrel. The EUR weakened, but remains clearly above 1.130 against the dollar. Released overnight the U.K. BRC shop price index dropped -1.7% in March, a slight uptick from the -2.0% y/y in February. Still to come, there is central bank speak from the ECB and the Riksbank and Germany, Denmark, Sweden and Norway sell bonds, while Greece issues bills amid fresh Grexit concerns.

US ISM-NMI March increased to 54.5: This was from a 53.4 two-year low that beat estimates and capped a four-month drop from a solid 58.3 as recently as October, versus a 59.6 ten-year high last July. The ISM-adjusted measure rose to 54.1 from 53.2 in February and a 53.1 two-year low in January, versus a 59.0 ten-year high last July. The ISM-NMI figures remain stronger than the factory sentiment readings likely because the service sector is benefiting from the boost to household purchasing power via lower gasoline prices, while the factory sector faces headwinds from an inventory overhang, weak foreign demand, restraint in the vehicle assembly rate, and a petro-sector recession. Given March strength in the factory sentiment figures, the ISM-adjusted average of the major surveys popped to a surprisingly solid 53 in March from 49 in both January and February and 50 over the last four months of 2015, leaving the strongest average since the 53 figure in June and July of last year.

US JOLTS report showed job openings fell 159k: 5,445k openings in February versus a revised 323k January gain to 5,604k (was 5,541k), though the January level was the 3rd highest of this cycle. The rate fell to 3.7% from 3.8%. Hiring rebounded 297k to 5,422k after diving 276k in January to 5,125k (revised from 5,029k). The rate rose to 3.8% versus 3.6% previously. Quitters increased 99k to 2,950k following the prior 237k decline to 2,851k (revised from 2,804k). The quit rate also rose to 2.1% from 2.0%.



Main Macro Events Today

• FOMC Minutes

The minutes to the March 17, 18 Fed meeting will be interesting for clues on the various outlooks of the Committee. However, Yellen’s dovish stance has usurped a lot of the importance of the minutes. Also, other Fedspeakers since the mid-March meeting have also let their feelings known, with even the more dovish members supporting expectations for 2 rate hikes this year. Meanwhile, data has revealed a slower Q1 economy, with our 2016 growth forecast now just 0.7%, with the Atlanta Fed at 0.4%. We know that in March, policymakers were contending with many uncertain and conflicting signals, as well as geopolitical concerns. Those factors left the FOMC on the sidelines, as they punted into Q2, although the economic projections for the year, along with inflation forecasts, were trimmed. Look for the minutes to largely underscore the various uncertainties domestically and around the world as the central reason for the unchanged policy stance.

• ECB Non-Monetary Policy Meeting

The Non-Monetary policy’s ECB meeting is this morning in Frankfurt. This is a monthly meeting and involves all 25 members of the governing council.

 

[HotForex]

Macro Events and News

FX News Today

BOJ Koruda and Japan Finance Ministry: A reiteration of the Japanese economic approach was emphasized overnight as both the BOJ Governor and the finance ministry chief (Mr Suga) pledged more of the same and that they “Will take steps in FX market if needed”. The YEN continued its surge against its major competitors USDJPY is current trading at 108.8, EURJPY 124.50 and GBPJPY 154.00. The Nikkei 225 was understandably subdued on the news and is currently the lagging Asian stock market.

European Outlook: The bounce back in oil prices, which have risen above USD 38 per barrel, is keeping equity markets underpinned and things continued to improve in Asia overnight, with most markets outside of mainland China in positive territory, although gains have been modest, compared to the rise in the U.S. and the U.K. The Fed minutes, which on balance favoured caution added support, while the rise in the Yen is keeping a lid on Japanese equities. U.K. stock futures are also higher, pointing to opening gains in Europe, with Eurozone markets likely to continue to underperform amid ongoing EUR strength and concerns about the economic and political outlook for the Eurozone as Grexit fears flare up again and push out spreads. The calendar is relatively quiet, with a focus on the ECB, which publishes the minutes to the March meeting and holds a conference on “The ECB and its watchers”.

FOMC minutes: They showed “several” officials argued for a cautious approach regarding the potential for an April hike, which was debated at the March meeting. As Yellen commented in her recent speech, and in her press conference, many participants thought the current rate asymmetry made it prudent to wait for more information on the underlying strength of economic activity or inflation before taking another step to reduce accommodation. The minutes revealed global concerns remained very relevant — the word “global” was used 13 times in the participants’ discussion of current conditions (“risks,” or some variation, appeared 16 times). Again the FOMC reiterated the next move would be data, not calendar, dependent. We’re not seeing anything really new in the minutes versus what we knew from the policy statement, the SEP, and subsequent Fedspeak.

Fedspeak, Positions Confirmed: Fed hawk Mester expects “gradual” rate hikes this year in a repeat of previous missives on the topic, in discussing the economy and monetary policy from Cleveland. Bullard also stated his expectation that inflation will overshoot the 2% target and that 2.2% inflation is better than 1.5% inflation and that all meetings are “live”. So more of the same from the Presidents.



Main Macro Events Today

• ECB’s Draghi Speech

Due to speak about the economic and financial situation in Europe at the Portuguese President’s Council, in Lisbon. The eloquent and reserved Mr Draghi is always one to listen too carefully. Portuguese Bonds were dragged down yesterday along with Grexit talk. Interesting location for his latest speech.

• Fed’s Yellen Speech

In New York the four latest Chairs (Volcker, Greenspan, Bernanke and Yellen) of the FOMC are meeting and Mrs Yellen is due to speak. As the incumbent Chair she is unlikely to use the occasion to utter anything new or indeed controversial. The words from her predecessors on the other hand could prove more interesting.

 

[HotForex]

Macro Events and News

FX News Today

JPY Remains Centre Stage: The surging yen continued yesterday and into the US open before giving up some of its strong gains over night, but the momentum and sentiment is clearly still with the YEN. The USDJPY traded to a low of 107.82 a figure not seen since October 2014 (just before the BOJ increased its QE programme substantially). EURJPY fell to a low of 122.56 and the GBPJPY 151.89. There were public pronouncements from Chief Cabinet Secretary Yoshihide Suga again yesterday that “We’re watching the foreign exchange market with a sense of tension,” adding that “the government believes excessive and disorderly movements in the exchange rate have a negative effect.”. However, with Japan hosting the next G7 meeting next month it’s unlikely (but far from certain) that the BOJ will intervene to weaken the surging currency. Only time will tell.

German trade surplus widens as export growth picks up. Germany posted a (sa) trade surplus of EUR 19.7 bln in February, up from EUR 18.7 bln in January, with exports rebounding 1.3% m/m, after the -0.8% m/m drop at the start of the year. Import growth meanwhile moderated to 0.4% m/m from 1.3% m/m. Accumulated data for the three months to January still show a decline in the three months trend, which confirms that the overall economy cannot rely on net exports to generate growth, as global headwinds get stronger. Unadjusted data show a slight widening of the current account surplus in the first two months of the year, compared to 2015, but the trade surplus is narrowing.

European Outlook: Asian stock markets were mixed overnight. Japanese markets improved as the Yen finally eased. Oil prices moved higher with the front end Nymex futures now slightly above USD 38 per barrel. US and UK stock futures are also posting gains, and risk appetite seems to be returning. ECB officials left the door to further easing measures wide open yesterday, even if they try to squash speculation of Helicopter money. Fed Chair Yellen also repeated that she sees some remaining slack in the labour market, although hawk George warned against delaying further hikes. In the Eurozone the flaring up of Grexit fears is pushing out yield spreads once again and causing further headache for Draghi. There is more ECBspeak on the calendar from Nowotny and Mersch today. UK publish trade data and there are also production figures from the U.K. and France alongside Swiss inflation numbers.

Draghi Speech, No change: ECB doesn’t have shortage of available tools. The ECB President said the March 10 measures will further support price stability and help maintain the trust in the currency. At the same time, he stressed once again that all actors need to play a role in the recovery of the Eurozone and that fiscal rules shouldn’t be stretched beyond credibility. He also said that there is no case for unraveling past reforms in Europe. Nothing really new there, although with the ECB reducing market pressure on governments to implement and stick with reforms, the central bank’s calls on governments have so far had little impact.



Main Macro Events Today

• UK Industrial Production

UK Industrial production is expected to slow 0.1% m/m from 0.3% m/m. Showing continued shrinking for UK factory output, even with a depreciating GBP demand particularly form Eurozone countries remains very weak. More evidence of a tough first quarter and sluggish global demand.

• Canadian Unemployment

The March employment report is expected to show a pick up in jobs to 10.4k but the unemployment rate to remain steady and unchanged at 7.3%.

 

[HotForex]

Macro Events and News

FX News Today

European Outlook: Asian stock markets outside of China are mostly higher, led by a rebound in Japan, where markets benefited from a weaker Yen and the BoJ’s decision to tweak the calculation for negative rates, which underpinned bank stocks amid hopes that the negative rate portion of bank reserves will be lower than feared. Oil prices are off earlier highs, but the front end WTI future is holding above USD 40 per barrel. US stock futures are also moving higher, but UK futures are down, with the U.K. continuing to underperforming amid Brexit fears. Released overnight. BRC retail sales came in much weaker than expected and unexpectedly contracted, which will add to pressure on the FTSE 100 ahead of the release of March inflation data today.

Tensions between ECB and Germany intensify: Finance Minister Schaeuble’s unusually clear comments on ECB policy saying that “there is a growing understanding that excessive liquidity has become more a cause than a solution to the problem” a reflection of a growing agreement among German policy makers that it is time to publicly distance themselves from Draghi’s negative interest rates policy. With the right wing AFD, which originally was founded on an anti-EMU platform gaining more and more support and German savers enraged by dwindling returns on private retirement funds, they were lured into by a public campaign trying to reduce pressure on the PAYG pension system, Merkel is under pressure to at least be seen as trying to reign in Draghi’s spending spree. Not that Germany questions the ECB’s independence, rather as with the OMT program, there are increasing doubts that the ECB is acting within its mandate. Even if a court dispute between German and the ECB is highly unlikely with the ECB heavily relying on investor trust in Germany as the stability anchor of the Eurozone, an open conflict between the central bank and the Eurozone’s largest economy could easily rekindle the debt crisis once again.

Kaplan Speech: He remains skeptical about negative rates, which can hurt banking, money and commercial paper markets, and he hopes the U.S. will avoid that trap. He said the “living will” process necessary if onerous and challenging to big banks. He expects global energy supply to exceed demand through the end of this year, leading to more volatility in the oil-gas industry, including bankruptcies and more restructuring until H1 2017. (He is the president of the Dallas Fed and should know better than most). However, he does expect the headwinds from the strong dollar to fade. Kaplan does not expect planned rate hikes to shift the Treasury yield curve significantly, nor lead to Fed portfolio losses.

The Debate on NIRP heats up: The ongoing controversy over Negative Interest Rate Policy (NIRP) continued in several articles circulating, with IMF’s Largarde defending the utility of negative rates in a blog post that suggested that lending and risk taking will increase. But Bill Gross of Janus said in a Barron’s article that savers would move into cash and could in fact hoard savings to compensate for the lack of returns from pension and insurance funds, and that could result in their ultimate demise. Larry Fink of Blackrock agreed in the FT that in the case of negative rates savers will divert funds into more savings, rather than less. The WSJ also pointed out the underperformance of banks in this environment heading into peak earnings season for banks.



Main Macro Events Today

• UK Consumer Price Index Headline CPI is expected to tick higher, to +0.4% (median same) from 0.3% in the month previous. The core CPI reading is also seen nudging up, to +1.4% y/y from 1.3%. PPI is expected.

• US Import and Export Prices March trade price data should show import prices up 1.6% with export prices down 0.2%. This follows February figures which had import prices down 0.3% and export prices down 0.4%. WTI prices improved in March which should help prop up import prices after a steady string of declines. Despite the increase, oil prices still remain at depressed levels so they could pose some continued downside risk.

 

[HotForex]

EURGBP attractive near the regression channel low

EURGBP, 240 min

EURGBP has been in an uptrend lately and is still breaking above recent pivotal highs. It has been attracting buyers after pull backs have taken the pair near S&R levels. Now that EURGBP has retraced from a new 22 month high it could be soon reviving buying interest from those that look to participate in this uptrend after a decent pullback. The pair is oversold in terms of Stochastics oscillator (7,3,3) while it tried to bounce from the 38.2% Fibonacci level. I expect the uptrend to continue but think that the current level is a bit too risky to trade long and expect the pair first to make another leg lower. This would bring it to my buy area. The regression channel low and the area between the 61.8% and 50% Fibonacci levels, together with the March high at 0.7946 should mean that quite a few market participants view this area as a potential area for long trades.

I am looking for long entry signals between 0.7938 and 0.7994 with Target 1 at 0.8080 – 0.8120 bracket and Target 2 at 0.8160 – 0.8180.

 

[HotForex]

Macro Events & News

FX News Today

European Outlook: Asian stock markets moved broadly higher, following on from gains on Wall Street yesterday amid a rebound in oil prices. The front end WTI Nymex future has moved off highs, but remains comfortably above USD 41 per barrel and with the USD strengthening Japanese markets were also supported by a weaker Yen. The EUR has fallen below 1.14 to the USD and U.S. and European stock futures are also higher, pointing to opening gains on European markets and ongoing pressure on core bond futures. Italian banks will remain in the spotlight, after yesterday’s disappointment over Italy’s bad bank plan led to a sell off in Italian bank stocks. The calendar has ECBspeak from Knot, Nowotny and Constancio and data includes final inflation readings from Spain and France

UK inflation data came in perkier than expected: Rising to a cycle high of 0.5% y/y in the March headline CPI rate, up from February’s 0.3% and above the median forecast for 0.4%. Core CPI jumped to 1.5% y/y from 1.2% previously. Airfares and clothing drove the index higher, offsetting weakness in food and petrol prices. The impact of sterling weakness is likely to have started having some impact. From March 2015 to March this year the GBP lost over 3% versus the dollar and against the euro (a better proxy of the trade-weighted value of sterling) over 9%. Cable traded as high as 1.4330 following the news, but USD strength overnight sees the pair at 1.4245 currently.

Fedspeak, Harker & Williams: Harker warned that it’s possible there will still be 3 hikes this year, depending on GDP numbers. He doesn’t see much slack in the labor market and doesn’t want to see the Fed running much above the 2% target inflation rate. Harker warns that if energy prices rebound more quickly, it is possible that the Fed will have to be more aggressive on rates. Later, Williams said that the he wasn’t that concerned about a hard landing for China, with the U.S. economy doing “quite well,” though the Fed must take into account what happens abroad. He also commented that the worst-kept secret is the Fed’s plan to raise rates, as the Fed is trying to telegraph the path of U.S. rates so the rest of the world can better prepare. Meanwhile, he’s not seeing big capital flight from emerging economies as the Fed talks about rate hikes.

Italy defends bank rescue plan: As investors mark their disappointment by selling off bank stocks, with even Intesa SanPaolo, Unicredit and Ubi Banca, closing down between 4 and 5% Tuesday. There concerns that the plan, which is based on a EUR 5 bln bad bank fund, is not ambitious enough to clear up Italy’s financial system and help mitigate losses from the large number of non performing loans in Italy’s banks. Bank of Italy’s Rossi said in an interview with La Repubblica that the new fund aims to resolve banking sector problems and Padoan told Sole that the ECB views the fund favourably.



Main Macro Events Today

• US Retail Sales March retail sales are expected to show a flat headline (median 0.1%) with a 0.3% (median 0.4%) ex-autos increase when the data is released on Wednesday. Retail sales declined in both January and February with the January headline down 0.4% and February down 0.1%. We expect some downside risk to the release from depressed chain store sales and vehicle sales declines.

• US (PPI) March PPI is out later today and should post a 0.2% (median 0.3%) increase with the core up 0.1% (median 0.1%). This follows a -0.2% headline and unchanged core rate in February. Oil prices have begun to rebound and this showed up in today’s March trade price index where import prices managed to improve 0.2% after a long run of declines.

 

[HotForex]

Macro Events and News

FX News Today
ECB’s Constancio: Helicopter money would not make a big difference, adding that “its something that of course we are very much limited by the treaty to embark upon”. At the same time he stressed that the ECB’s Negative-Rate Policy has its limits, as “there is always the possibility of hitting the limit where the preference for cash withdrawals would set in”. He added that “the instruments should not push banks to pass on their additional direct costs by turning deposit rates negative or increasing lending rates to increase margins. Both developments would be problematic for our monetary policy goals”. For now Constancio argues that the net effect of the negative deposit rate is “positive for the euro area as a whole”, while stressing that it takes time for the positive effects to materialise fully.

Australian unemployment fell to a cycle low of 5.7% in March, which offset a Moody’s warning to the Australian government that it needs to hike taxes at its budget in May. As a result Australian dollar is now up against all the major peers between 0.3 to 0.9% expect the USD that has gained 0.5% against the AUD.

As expected, the BoC left rates steady at 0.50%. The growth outlook was boosted a bit too GoC yields pulled back to session lows in tandem with the drop in the Treasury 10-year rate following the stellar Treasury auction. The market had already reflected its approval of what Governor Poloz had to say in his press conference, where he maintained two way risk in terms of the policy rate (BoC is not “sidelined”). He also talked-up the negative shocks seen since January, which were more than offset in the projection by impending fiscal stimulus.

Fed’s Beige Book said activity expanded modestly in most Districts, though the pace of growth varied. The report, prepared by the Chicago Fed, did note though, that wages increased in 11 of the 12 Districts (excluding Atlanta), and there were signs of a pickup compared to the last survey period. The strongest wage pressures continued to be seen for occupations where there were labor shortages. Labor market conditions continued to strengthen, with only Cleveland reporting a decline. Consumer spending mostly increased and retailers remained generally optimistic about the growth outlook over the rest of 2016. Manufacturing mostly increased and nonfinancial services picked up too. Construction and real estate generally expanded too. While the report was mostly optimistic, nearly all the adjectives were moderate or modest, suggesting the hit to the economy from the oil recession is dissipating.

Main Macro Events Today

• Euro Area CPI: The consumer price index for March is expected to come in unchanged from the -0.1% in February. The March HICP (Harmonised index of consumer prices) was confirmed at -0.1% at the end of March and therefore the CPI reading probably follows in its footsteps. The difference between Italian and German inflation numbers (Italian HICP fell further to negative territory) likely makes the ECB’s job harder.

• BoE Vote and Minutes: The BoE is widely expected to maintain an unchanged policy stance, by a unanimous vote. The start of rate normalisation is still a long way off and the uncertainty over the outcome of the Brexit referendum in July is the main focus for markets as polls are pointing to a close outcome at the Jun-23 referendum. We expect the vote will swing to the “remain” side given the fear of near- to medium-term economic disruption. However, there are signs that the uncertainty about what will happen in the event of leaving the EU has been casting a negative impact on economic activity. A survey published by Deloitte last Monday found that a “fog of uncertainty has descended on the corporate sector” as a consequence of uncertainty about EU membership.

 

[HotForex]

Macro Events and News

FX News Today

China’s economic growth was slowest in seven years in the first quarter. At the same time though indicators from consumer, investment and factory sectors show encouraging signs that the slowdown in Chinese economy may soon be over. Official government data on Friday showed GDP grew 6.7 percent in the Q1 2016 from the previous year, (in line with analyst forecasts). This was slight drop from 6.8 percent in the fourth quarter. Reuters reports that while this was the weakest pace of expansion since the first quarter of 2009, when growth tumbled to 6.2 percent, other activity data reinforced previous signs that the economy may be finding traction with better-than-expected growth seen in retail sales, industrial output and fixed asset investment.

PBoC Deputy Governor said the economy is “pretty robust” in late-breaking remarks that China GDP could grow by 6.5-7.0% this year given electricity consumption figures and other data. The biggest challenge was to continue to carry out reforms, he said, while he felt the message had been received that the yuan is pegged against a basket of currencies, of which the dollar still has a relatively large weight. He concurred that market forces were the primary driver of FX moves and the bank doesn’t want to see a severe overshoot from current near-equillibrium levels. He also endorsed the independence of China monetary policy. USD-JPY got a little bid with the remarks as USDCNY cruised aback over 6.48%.

US Fed Lockhart: June should remain an option for a rate hike, he told reporters. But he added that Brexit is a consideration for policymakers, though how it “will be weighed, or should it be weighed is an open question.” It could affect exchange rates and raise long-term questions on the euro area. Yet, he doesn’t think it should “stop the music” for the FOMC, however.

BoE Holds Steady Amid Brexit Risk: The BoE once again voted unanimously to keep rates on hold yesterday, as widely expected. The uncertainty ahead of the Brexit referendum on June 23 is starting to have an impact on investment and the central bank like many investors seems to be in wait and see mode, even if the implicit tightening bias was left in place. The MPC highlighted that in this climate even the interpretation of economic indicators will be more difficult and that means no major decisions either way are likely to be made ahead of the referendum.

Main Macro Events Today

• US Industrial Production: The US Industrial production is expected to fall 0.4% in March, after falling 0.5% in February. Forecast risk: downward, as March mining data remained depressed. Market risk: upward, as a run of weaker data could impact rate hike timelines.

• US Capacity Utilization: The US Capacity Utilization numbers are out today and are expected to come in slightly lower than in March. The consensus expectation is 75.4% in March after 76.7% level in February. This follows a descending trend in the capacity utilization in 2015 after the index peaked at 80% in December 2014.

 

[HotForex]

The Economic Week Ahead

Main Macro Events This Week

• United States: The US markets will monitor earnings announcements, which get into full swing this week and will fill an otherwise light economic calendar. The April NAHB homebuilder sentiment index opens the week (Today) and is forecast to inch up to 59 after holding at 58 in February and March, from 61 in January. Housing starts for March (Tuesday) should rise 0.6% to a 1.185 mln unit pace following the 5.2% February rebound to 1.178 mln. March existing home sales (Wednesday) are forecast jumping 4.3% to a 5.30 mln clip in March after dropping 7.1% to 5.08 mln in February. The February FHFA home price index (Thursday) should rise to 231.0 after gains of 0.5% over the prior four months. The April Philly Fed manufacturing index is forecast falling 4 points to 8.0 after surging an outsized 15.2 points to 12.4 in March. That was the highest level since December 2014. The April flash Markit PMI is due (Friday). Initial jobless claims for the week ended April 16 are seen slipping to 252k after dropping 13k to 253k in the prior week (the lowest since 1973). This week’s figure will be important since it coincides with the BLS job survey week. It should reinforce signs of ongoing strength in the labor market. Fedspeak is very light, and all on Monday, before the pre-FOMC blackout period begins.

• Canada: The economic data will finalize the February GDP projection. We expect wholesale trade shipments (Wednesday) to tumble 1.0% in February after the flat reading in January. Retail sales (Friday) are anticipated to fall 0.8% in February after the 2.1% surge in January while the ex-autos aggregate drops 1.0% in February on the heels of the 1.2% gain in January. CPI rounds out the week, with a slowing to a 1.1% y/y growth rate in March seen from the 1.4% pace in February. The Bank of Canada’s core CPI is expected to moderate to a 1.8% clip in March from 1.9% in February. There is nothing from the Bank of Canada this week.

• Europe: The focus is squarely on the ECB meeting (Thursday), although central bank officials have made pretty clear that for now the focus is on the implementation of the easing package from March and that no further action is on the table for now. Data releases this week focus on the first round of confidence data for April in the form of the German ZEW and preliminary PMI readings. The calendar also includes national French business confidence, as well as German PPI, Eurozone current account as well as the preliminary reading of Eurozone consumer confidence, although market impact here is likely to be limited. Germany sells 10 year Bunds (Wednesday). The event calendar also has Eurogroup and Ecofin meetings with markets likely to hope for comments on Greece at the former and possible Brexit implications at the latter.

• UK: Brexit risk continues to overshadow proceedings. The calendar this week is highlighted by labour data (Wednesday), official retail sales data (Thursday) and government borrowing figures (also Thursday). We expect the labour data to see the headline claimant count fall by 12k in March and the unemployment rate remain unchanged at 5.1% in February. Retail sales are seen ebbing 0.1% m/m, which would translate to a 4.4% gain in the y/y comparison.

• China: There are no scheduled economic releases this week.

• Japan: The March trade report is due on Wednesday, where the surplus is expected to widen to JPY 750.0 bln from February’s JPY 242.2 bln. The February tertiary index (Friday) is seen falling 1.0% m/m versus the 1.5% increase previously.

• Australia: The minutes to the Reserve Bank of Australia’s April 5 meeting will be released (Tuesday). The Bank left the target rate unchanged at 2.0%, as expected. The last policy action was a 25 bp cut in May 2015. Employment picked up in March, while the unemployment rate dipped to 5.7%, after dropping to 5.8% in February. But the stronger AUD and uncertainties over Chinese and EM growth have been headwinds to more robust growth, and that’s keeping policymakers on guard. RBA Governor Stevens (Tuesday) delivers a speech. The economic data calendar is thin this week, with no top tier releases scheduled.

 

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[HotForex]

Macro Events and News

FX News Today

European Outlook: Global stock markets recovered yesterday in tandem with oil prices and Asian markets followed suit with Japan in particular staging an impressive rebound. The Nikkei is up nearly 3.5% and the Topix gained nearly 3% after yesterday’s steep decline. The front end WTI (USOil) future is slightly off earlier highs, but still just shy of the EUR 40 per barrel mark and the weaker Yen helped stock markets to recover in Japan. Mixed U.S and UK stock futures are painting a more cautious picture although the DAX is higher ahead of the official opening. The local calendar has German ZEW investor confidence, seeing improving slightly amid the general recovery in risk appetite, as well as Eurozone current data and the latest ECB bank lending survey. The UK remains focused on the Brexit debate.

IMF Estimates Still too Rosy as Global Growth Slows: The IMF’s recent world growth downgrades left 2016 estimates that are still too optimistic given the ugly Q1 performance for both the developed and emerging economies. The market’s early-year panic alongside the winter oil price plunge proved partly justified, though most of the year’s bad news is hopefully behind us. We expect a modest 2016 undershoot of IMF growth estimates across all the major countries and regions except Canada and the U.K., Brexit risk aside, before an improved trend into 2017.

Fedspeak: The Fed’s Kashkari said Chair Yellen is open-minded in her policy approach. The comments are from an interview posted on the Minneapolis Fed’s website. He noted the various challenges facing policymakers, including a slowing in China which has caused shocks around the world, and Brexit. And he added the Fed of course has a “de facto, huge global influence,” and is aware of its impact on world economic developments (it’s part of the Fed’s calculus). He thinks the existing structure of the Fed is working well. There wasn’t anything new or especially market moving in his remarks, especially since the FOMC is universally expected to be on hold at next week’s meeting.

ECB’s Knot: Realistic to think rates won’t rise for a while. The Dutch central bank head said at a conference in The Hague that “for the short term its realistic to think the interest rate won’t rise”, although he warned home buyers to take possible increases in the future into account. It’s hardly a surprise that the ECB is not thinking about rate hikes at the moment, but Knot is right of course to remind consumers that in the long run rates will go up again. The last thing the ECB needs is a real property bubble and excessive risk taking in the mortgage market.



Main Macro Events Today

• US Housing Starts: March housing starts data is later today and should reveal a slight headline increase to 1,185k (median 1,170k) from 1,1798k in February. Permits should be 1,200k from 1,177k in February and completions are seen at 1,040k in March from 1,016k in February. There is some upside risk to the data as construction employment remained firm in March and the NAHB remained stable.

• German ZEW: German ZEW investor confidence is expected to have recovered somewhat, in line with the stabilisation on markets and we are looking for a rise in the expectations reading to 7.0 (med 8.0) from 4.3 in the previous month. Confidence data nevertheless is pointing to a gradual loss of momentum in core Eurozone countries including Germany, with the second quarter likely to look weak in comparison to the first quarter

 

[HotForex]

Macro Events and News

FX News Today

European Outlook: The global stock market recovery run out of steam in Asia, with bourses mixed. Chinese equities retreated and Japan managed only slight gains as oil prices retreated. The front end WTI future fell towards USD 40 per barrel, after Kuwait workers said they would end the strike that has disrupted output. A stronger Yen weighed on Japanese markets and US and UK stock futures are also down, indicating that bond futures could recover some of their recent losses in Europe. The calendar has UK labour market and earnings data and a German Bund sale. Markets will be looking ahead to tomorrow’s ECB meeting, with Draghi seen on hold for an extended period, but hopes of further action down the line remain, even if helicopter money may be too much of a leap. And like ECB officials BoJ Governor Kuroda also played down the idea, citing legal issues.

BoJ Governor Kuroda rejects idea of helicopter money, saying that he isn’t thinking about helicopter money and that the version that tries to inject cash into the economy by permanently monetising fiscal deficits would be blurring the line of fiscal and monetary policy and contradicts the current legal framework. Kuroda told lawmakers that “unless the existing legal framework changes, helicopter money isn’t possible, and we at the Bank of Japan aren’t thinking about it at all”.

German PPI -3.1% In March 2016 the index of producer prices for industrial products fell by 3.1% compared with the corresponding month of the preceding year. In February 2016 the annual rate of change all over had been –3.0%. In March 2016 energy prices decreased by 9.2% compared with March 2015, prices of intermediate goods by 2.3% and prices of non-durable consumer goods by 0.3%. In contrast prices of capital goods rose by 0.6% and prices of durable consumer goods by 1.4%. The overall index disregarding energy decreased by 0.9% compared with March 2015.

BoC Governor Poloz: His opening statement provides a summary of the MPR, as is typically the case in these appearances before the House and Senate. He listed the three negative developments for the growth outlook that have emerged since January, which were more than offset by the fiscal measures put forth in the Federal budget in March. The growth outlook is 1.7% in 2016, 2.3% in 2017 and 2% in 2018, as seen in the MPR. Cautious optimism remains in place: economic data have been “encouraging on balance”, but also “quite variable.” There has not been “concrete evidence of higher investment or strong firm creation.



Main Macro Events Today

• US Existing Home Sales: March existing home sales data is out later today and should reveal a 4.3% rebound to a 5.300 mln (median 5.236 mln) pace from 5.080 mln in February and 5.470 mln in January. The month’s housing starts release revealed a drop to a 1.089 mln pace from 1.194 mln in February. Secondary measures of housing data were stronger in March with the MBA purchase index up by 4.2% and the NAHB composite holding steady.

• Draghi & Poloz: Speeches are scheduled today by the ECB’s Mario Draghi at the ECB Generation Euro competition, in Frankfurt; and the BOC’s Poloz who will continue his testimony to the Finance Committee at the Canadian parliament.

 

[HotForex]

Macro Events and News

FX News Today

European Outlook: The decline on global stock markets continued in Asia overnight, with most markets in the red. UK stock futures are posting slight gains; however as oil prices managed to claw back some losses and the front end WTI future moved above USD 43 per barrel after falling to an earlier low of USD 42.64. A stronger Yen added to pressure on Japanese markets ahead of the BoJ meeting later this week, while the fact that the EUR is holding below 1.13 to the dollar will be welcomed by Eurozone investors. Markets are cautious ahead of this week’s central bank meetings, with the Fed meeting starting today. The local calendar is very quiet with only UK BBA mortgage approvals and French jobseekers.

US Sentiment Mixed Signals: The Empire State and Philly Fed reports revealed opposing April headlines, with a big gain for the Empire State but a dramatic plunge for the Philly Fed. We think the March sentiment upswing will mostly survive this early-April divergence, with a drop-back in the ISM-adjusted average of the major measures to 51 after the March pop to 53 from lower 49 averages in both January and February. The price measures of both surveys were firm, and price gains into April should sustain firmness in the remaining April surveys.

US Dallas Fed manufacturing index falls: The index slipped to -13.9 in April from -13.6 in March, a 16th consecutive monthly decline, though the pace of decline is only about 1/3 of what it was in January. The employment component improved to -3.7 from -10.3, but remained in contractionary territory for a 4th straight month. The workweek was -1.0 from -5.6. New orders jumped to 6.2 from -4.8, and are the highest since October 2014. Prices paid rallied to 5.5 from -0.2, and are in positive territory for the first time since June, with prices received at -6.6 from -8.2. Capital expenditures rose to 1.6 from -0.9. However, the 6-month general business activity index eroded to 0.4 from 6.1, with employment weakening to 9.4 from 13.0, though new orders improved to 32.6 from 29.7, with prices paid edging up to 20.2 from 18.9. Capital expenditures dipped to 8.5 from 13.3. This is a mixed report with some signs that the recession in the region is easing, though the slide in some of the future indicators is disappointing.

US New Home Sales mixed: New home sales saw a 1.5% March drop to a 511k rate, but with prior boosts that left a stronger than expected 515k Q1 sales rate that matched the cycle-high in Q1 of 2015. Inventories beat estimates after upward revisions to leave a six-year high, though median prices fell 3.2% in March after downward revisions to leave a 1.8% y/y decline



Main Macro Events Today

• US Durable Goods: March durable goods data is out today and we expect orders to grow 1.0% (median 1.9%) on the month with shipments down 0.5% and inventories down 0.2%. This follows respective February figures of -3.0% for orders, -1.0% for shipments and -0.3% for inventories. Data in line with our forecast would leave the I/S ratio steady at 1.66 for a second month.

• US Consumer Confidence: April consumer confidence is also out later today and should reveal a headline decrease to 95.5 (median 95.8) from 96.2 in March. This would fit with the broader trend of confidence declines in April where we saw a Michigan Sentiment decrease to 89.7 from 91.0 and an IBD/TIPP decline to 46.3 from 46.8.

 

[HotForex]

German import price inflation higher than expected

EURUSD, 240 min

German March import price inflation higher than expected, with the annual rate falling to -5.9% from -5.7% y/y in February, against a Bloomberg median of -6.2% y/y. Excluding energy prices, however, the picture is somewhat different, as the annual rate dropped sharply to -3.6% y/y from -2.8% y/y in February and compared to 2.2% y/y in July last year. The data show ongoing dis-inflation pressures from import prices, stemming not only from oil prices and subsequently strengthen Draghi’s push for additional easing last month.

There was no notable market reaction in EURUSD to the release. The pair is ranging between 0.38 and 0.5 Fibonacci retracement levels after yesterday’s move to 1.1278 was rejected and price bounced higher from 30 period MA. Nearest significant support and resistance levels are at 1.1253 and 1.1340. Markets are likely to be in a wait and see mode until the FOMC rate decision. No change is expected and as there is no press conference the actual words in the Monetary Policy Statement released at 18:30 GMT will be scrutinized very closely.

 

[HotForex]

Macro Events and News

FX News Today

European Outlook: Most Asian stock markets are down on the day, disappointing earning results added to Yen strength weighed on Japanese markets. Oil prices are higher and the front end WTI future is comfortably above USD 44 per barrel, but investors remain cautious ahead of this week’s round of central bank decisions, which kicks off with the Fed announcement today, which will be followed by the BoJ tomorrow. Fed is unanimously expected to maintain and unchanged rate stance (there is no press conference). Hence, the focus will be on the nuances of the policy statement and we see some risk that it will be more hawkish than markets expect. In Europe, the focus is on the first release of UK. Q1 GDP data, which is expected to confirm that growth moderated somewhat at the start of the year. The UK. also has CBI reported sales data for April.

Australian CPI much weaker than expected: The headline figure for the quarter (q/q) -0.2% expected +0.2%, previous reading +0.4%. The yearly y/y 1.3% from previous 1.7% and expectations of 1.7%. The ‘trimmed mean’ (Core inflation) also lower at 0.2% (0.5% expected and 0.6% q/q) and 1.7% y/y expectations were for 2.0% previously 2.1%. This is a very large variance over one fifth lower than expectations. Low inflation is effectively a tightening of interest rates so this poor number raises the expectations of the RBA having to cut rates. The RBA next meet May 3. AUDUSD fell over 1.7% and is currently trading at 0.7610.

ECB’s Coeure: Only sharp EUR appreciation would be concern. The Executive Board member seems to suggest that current levels are not a problem and won’t trigger further ECB action on their own. At the same time Coeure hit out at critics of the ECB’s policy, seeing that some of them miss the bigger picture. Especially Germany has been very critical of the central bank’s policies, but Coeure stressed that these critiques do not hamper the central bank’s ability to function, which implies that political pressure won’t prevent further action if the ECB sees the necessity to act.

US Weak Sentiment Signals: Revealed a weak round of March durable goods figures thanks to weak equipment data, and an expectations-led April consumer confidence drop. Yet, the April decline in the Richmond Fed index to 14 from 22 translated to a surprisingly strong 55.7 on an ISM-adjusted basis, while the Markit Services flash PMI rose to 52.1 from 51.3. Thanks to the weak equipment data, the mix lowered our GDP growth forecast to a flat figure from 0.3% in Q1 and a 2.0% clip from 2.2% in Q2. The factory sector remained weak through March despite the bounce for factory sentiment, and we still expect an upturn in the factory figures in Q2.



Main Macro Events Today

• FOMC Rate Decision: 18:00 GMT – No change expected and as there is no press conference the actual words in the Monetary Policy Statement released at 18:30 GMT will be scrutinized very closely.

• UK – GDP Prelim:. 08:30 GMT – A fall to 0.4% is expected from 0.6% last quarter and the y/y figure is expected to shrink to 2% from 2.1% last time. GBPUSD has been in a strong uptrend recently.

 

[HotForex]

Macro Events and News

FX News Today

BoJ refrained from easing policy, causing widespread disappointment in markets given the backdrop of a strong yen and low inflation. Data today showed April headline CPI unexpectedly falling back into deflation at -0.1% y/y, while the core reading — which the BoJ is mandated to target at 2% — dove to a three-year low of -0.3% y/y, down from 0.0% in March. The central bank left the deposit rate at -0.1% and the annual pace of QQE purchases at Y80 tln. The BoJ has left policy on hold in both of the meetings since its Jan-29 gathering, when it decided to introduce NIRP (implemented on Feb-12). The central bank once again pushed back its forecast for driving inflation to its 2% target to “during fiscal 2017” (once upon a time it was 2015). The statement maintained that the economy has “continued its moderate recovery trend,” but warned that growth would be lower due to weak export performance and kept the door ajar for further easing.

Reserve Bank of New Zealand held rates steady at 2.25% after cutting by 25 bps to 2.25% in March. The 2.25% rate setting is a record low. The March cut was driven by a concern over eroding inflation expectations. Low headline inflation was again noted, with a material decline in shorter term expectations still front and center at the Bank. Despite the lack of action in April, more rate cuts could be in store: Governor Wheeler said “Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.” That’s a repeat from March.

Fed Stuck in Neutral All Over Again: The Fed had a few tricks up its rhetorical sleeves in April, but made few meaningful changes to the economic or policy outlooks in its steady decision. Growth and inflation remained finely balanced and any reference to the “balance of risks” was accordingly left out of the statement, as the FOMC continues to straddle the fence on the next move. Some excitement came with the apparent departure of “global economic and financial developments,” though this snuck back in later in the statement. A closer look at the details shows the Fed is cognizant of the poor outlook for Q1 GDP “even as growth in economic activity appears to have slowed.” It was also a little more downbeat on inflation “inflation has continued to run below the Committee’s 2% longer-run objective,” compared to “inflation picked up in recent months” previously.

Main Macro Events Today

• US GDP The first release on Q1 GDP is out today and should reveal a 0.5% (median 0.7%) headline clip for the quarter. This would follow a 1.4% pace in Q4 of last year and 2.0% in Q3. We expect the ongoing inventory unwind to weigh on the headline but the advance trade report yesterday revealed a big 3.4% import decline which is likely an extension of this unwind. Import weakness will likely benefit net exports for the quarter which will help prop up the headline.

• US Jobless Claims Claims data for the week of April 23rd should remain steady with a 247k (median 255k) headline that matches last week’s headline. Claims look poised to leave a 255k average in April which would follow a 264k average in March and 261k in February. The monthly employment report is expected to show a 210k headline from 215k in March with the unemployment rate ticking down to 4.9% from 5.0% last month.

• German Unemployment
  German jobless numbers have fallen to very low levels, but with growth slowing down, the improvement on the labour market is also running out of steam and we are looking for a slight uptick in the German sa jobless number for April of 4K, which should leave the jobless rate at a low 6.2% (medians same). The tight labour market has been pushing up wages and is underpinning consumption but the integration of the large number of refugees will be the main challenge for coming years.