US equities made fresh record highs following some strong economic data, the S&P500 currently up 1.0%. Risk-sensitive currencies rose. Bond yields surprisingly fell, perhaps affected by geopolitical tensions involving Russia. The US imposed new sanctions on Russia, including restrictions on buying new sovereign debt, in retaliation for alleged misconduct including efforts to disrupt the US election. Ukraine warned Russia against troops crossing its border, citing a build-up, and appealed for Western support to avoid direct confrontation.
Commodities, Brent crude oil futures rose 0.3% to $66.80, copper rose 2.4%, iron ore rose 2.8% to $177.15, and gold rose 1.7%.
Overnight Currency Ranges
AUD/USD 0.7706 0.7761
EUR/USD 1.1956 1.1993
GBP/USD 1.3762 1.3809
NZD/USD 0.7138 0.7180
USD/CAD 1.2477 1.2558
USD/CNH 6.5221 6.5441
AUD/JPY 83.90 84.40
AUD/NZD 1.0793 1.0827
AUD/USD - Firm around a month’s high towards 0.7800, focus on China data dump
In China, 1Q21 China GDP growth is on track to reach 18% given the very low base in 2020. While such a rapid growth pace would prompt policy makers to tighten on the margin, markets expect the overall policy stance to remain as “Turn, but not U-turn” in the April Politburo meeting, which comes after the GDP release.
China’s monthly industrial indicators are expected to remain robust after adjusting for the base effect. The push for carbon neutrality may have slowed the industrial activities in March, but the strong export growth should continue to support industrial production. The two laggards in the post-COVID recovery, consumption and capex, could improve further in March. The consumption recovery may have also resumed with the modest Covid outbreak under control. Capex could pick up on PPI reflation and strong profitability – in Jan-Feb, the profits of industrial corporates surged by 179% Y/Y and its 2-year CAGR since 2019 also hit 31%.
US March building permits and housing starts are also likely to be solid, capturing the underlying trajectory of the economy as well as the reversal of weather effects weighed on February data.
The AUD/USD continued higher overnight with offering interest still expected ahead of 0.7800 while demand has likely followed spot higher and rest back at 0.7710-20.
Event Risk Data Today
New Zealand: Ahead of the March update, the manufacturing PMI has been firming, but supply disruptions may be a drag.
China: China's economy went from strength-to-strength in 2020, registering annual growth of 6.5%yr despite the ill effects of the pandemic in Q1, when annual growth fell to -6.8%yr. Annual GDP growth for the first half of 2021 will be flattered by base effects. Market forecast of a 19.1%yr gain in Q1 2021 will also be a circa 5% annualised gain quarter on quarter, fuelled by broad-based strength in investment as well as demand from the consumer. Industrial production (market f/c: 26.5%yr ytd), fixed asset investment (market f/c: 26%yr ytd) and retail sales (market f/c: 31.7%yr ytd) will all reveal that not only has China recouped its losses, but built a strong foundation for a long and robust new growth cycle.
US: Housing starts were disrupted by weather in February, but are set to rebound 13.4% in March. Meanwhile, building permits are set to advance 1.7%, already near a 15 year high. The April Uni. Of Michigan sentiment index will be supported by the relaxation of restrictions, stimulus, and the vaccine rollout (market f/c: 89.0).