Market Roundup
- BoJ leaves policy unchanged, vote 8-1, Kiuchi disagrees again, for longer CPI target, pre-Oct 31 policy, economy to continue to recover moderately, core CPI seen in zero to +0.5% range, to stay depressed for now.
- Japan FinMin Aso - A year or two not enough to change deflationary mindset after 20 years of deflation, China economy poses downside risk.
- RBA considered rate cut, decided to pause for more data, lower AUD to help economy, still high, labor market to stay sluggish, spare capacity still.
- Sweden FinMin Andersson - Must support investment to boost inflation, strong SEK makes it harder to push up consumer prices.
- US Treasury Jan international capital flows - net $55.08 bln Treasuries sold, outflow highest in three years, China Tsy holdings $1.239 trln, Japan trln, Dec $1.244 trln and $1.231 trln, net overall capital inflow $88.3 bln.
- China Feb FDI +0.9% y/y, Jan-Feb +17%, outbound investment +68.2%, +51%, EUR slide ups pressure on China exports.
Economic Data Ahead
- (0600 EDT/1000 GMT) Germany Mar ZEW economic sentiment index, 58.2 consensus; previous 53.0.
- (0600 EDT/1000 GMT) Germany Mar ZEW current conditions index, 50.0 consensus; previous 45.5.
- (0600 EDT/1000 GMT) Germany Feb inflation - final, +0.6% m/m, -0.3% y/y consensus; prelim -1.6%, -0.3%.
- (0600 EDT/1000 GMT) Euro Zone Feb - ex-food/energy, +0.5% m/m, +0.6% y/y consensus; prelim -1.6%, +0.6%.
- (0600 EDT/1000 GMT) Euro Zone Feb - ex-tob, fd/ener/alc/tob; previous -1.6% m/m, -0.7% y/y, -1.9%, +0.6%.
- (0600 EDT/1000 GMT) Euro Zone Q4 employment; previous +0.2% q/q, +0.6% y/y.
- (0830 EDT/1230 GMT) US Feb housing starts, 1.05 mln AR consensus; previous 1.07 mln, -2.0% m/m.
- (0830 EDT/1230 GMT) US Feb building permits, 1.07 mln AR consensus; previous 1.06 mln, +0.2% m/m.
Key Events Ahead
- N/A Frankfurt Finance Summit (final day), various speakers.
- N/A Riksbank DepGov Skingsley at Stockholm breakfast meeting.
- N/A Spain E4-6 bln 3 and 9-month, ESM E1.5 bln 6-month bill auctions.
- N/A Italy 2032 bond syndication via Barclays, Credit Agricole, GS et al.
- N/A FOMC begins two-day policy meeting.
- (0230 EDT/0630 GMT) BoJ Gov Kuroda press conference.
- (0530 EDT/0930 GMT) ECB 7-day refi at fixed 0.05%, E138 bln allotment consensus, last E141.8 bln.
FX Recap
EUR/USD held steady at 1.0568 levels on Tuesday after weaker U.S. data and market expectations ahead of this week's FOMC policy meeting slowed the dollar's rally and helped the euro to pull out from 12-year lows. The pair has been under pressure ever since the ECB started its bond buying programme.
USD/JPY is still stuck in a thin 121.00-121.61 levels, however, overall trend remains with the bears. It is likely to retest the 122 levels soon. On the downside, a break below 120.50 would confirm the end of bullish trend.
AUD/USD trimmed gains and traded in the red on Tuesday, still staying below the 0.77 levels. It currently trades at 0.7634 levels. Last week the pair tried to break above the 0.77 levels but failed, and a convincing break above this level would push the pair to 0.7850 levels and then to 0.8200 levels. On the downside, support is seen at 0.7610 levels and then at 0.7550 levels.
NZD/USD rose to fresh session highs in the mid-Asian session, extending gains from the last session. It currently trades at 0.7379 levels. On the topside, immediate resistance is located at 0.7409 levels, above which gains could be extended to 0.7450 levels. On the flipside, the pair is likely to find support at 0.7320 levels and a break below could drag it to 0.7300 levels.
USD/CNY: China's yuan is likely to witness it biggest rise against the US dollar in six weeks after the PBOC set a stronger midpoint rate at 6.1585 per dollar on Tuesday. China's state-owned banks have reportedly sold dollars, possibly on behalf of the PBOC, to boost the yuan, suggesting that the central bank has low tolerance for a sharp depreciation in the yuan. The spot yuan opened at 6.2587 per dollar and was trading at 6.2548 at midday.
