13th April 2021 - Greenback shed some ground across the board, major pairs held familiar levels

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Market Headlines

US equities stalled near record highs, the S&P500 currently down 0.1%, amid little news flow. Currencies were mixed and contained, while US bond yields rose slightly following issuance auctions.

FOMC member Bullard said that while it was too early to start taking about changing policy, and he would leave it up to Chair Powell to initiate the discussion on tapering, once 75% to 80% of the population is vaccinated, "it will be time to start assessing where we want to go next." He also noted that It will be difficult to interpret CPI data due to base effects as well as supply chain bottlenecks, with better comparisons to be made in the second half of this year. He was encouraged by the price increases to date, and would like to see market and survey-based inflation expectations rise further. He has no concerns over systemic risks.

Commodities, Brent crude oil futures rose 0.4% to $63.20, copper fell 0.6%, iron ore rose 0.3% to $172.75, and gold fell 0.7%.

Overnight Currency Ranges

AUD/USD 0.7596 0.7635

EUR/USD 1.1871 1.1919

GBP/USD 1.3669 1.3776

USD/JPY 109.25 109.77

NZD/USD 0.7014 0.7049

USD/CAD 1.2528 1.2572

USD/CNH 6.5453 6.5661

AUD/JPY 83.17 83.68

AUD/NZD 1.0816 1.0841

AUD Thoughts

March China trade numbers will be released today with numbers expected to remain resilient. Exports growth may edge down modestly given a higher comparison base from 2020, but the robust external demand could still support growth – the NBS manufacturing PMI bounced back in March, with the new export orders sub-index back at above 50. Imports could pick up on higher commodity prices and as a result, the record-high trade surplus from last year should start to normalize.

For UK, the country’s frictionless border with the EU finally ended at the turn of the year, causing a record drop in UK trade with the EU in January. One-off stockpiling beforehand and COVID lockdowns would have amplified the Brexit effect, but sterling should be less forgiving on Tuesday if February’s trade numbers fail to show a meaningful improvement.

AUD/USD remained in a tight range (0.7596/0.7635) overnight after closing last week at 0.7618. Demand has likely grown toward 0.7560 while offering interest should materialise as we reach a 0.7700 handle.

Event Risk Data Today

Australia: The March NAB business survey should continue to reflect the economic reopening, with the February print showing conditions at their highest level since mid-2018. Weekly Payroll Jobs and Wages for the week ended Mar 27 will provide a snapshot of the labour market before the end of the JobKeeper subsidy.

New Zealand: March is likely to have seen a dip in the Quarterly Survey of Business Opinion as New Zealand briefly returned to higher alert levels and the Government announced major interventions in the housing market. These changes are likely to be a drag on house prices and confidence. The survey’s pricing gauges will be worth watching, with supply disruptions and shortages of some goods pushing costs of production and output prices higher. Meanwhile, the markets expect a modest 0.2% fall in retail card spending in March. Earlier in the month, the Covid Alert level was dialled up for around 12 days.

China: Surging exports should continue to support the March trade surplus (market f/c: USD 52bn).

Euro Area: The ZEW survey of expectations has recovered to pre-COVID levels, but extended lockdowns present a risk for the April read.

US: March NFIB small business optimism will be supported by the stimulus and the rapid pace of vaccinations (market f/c: 98.0). The March CPI is expected to print at 0.5%mth (2.5%yr), with further temporary increases over coming months.

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