US and European equities fell for a second consecutive day, the S&P500 down 0.7%. Bond yields also fell, while the defensive US dollar rose. The WHO warned that the pace of pandemic infections is rising in some countries at an alarming rate. The World Health Organization (WHO) warned that Covid infections have been rising at an alarming rate over the past two months. Last week’s 5.2m case count was a record, WHO Director-General Ghebreyesus said during a news briefing in Geneva on Monday.
The US dollar index is up 0.2% on the day. EUR fell from a six-week high of 1.12080 to 1.2023. The safe-haven yen performed best, USD/JPY down from 108.55 to 108.03). AUD fell from a one-month high of 0.7816 to 0.7709. NZD similarly fell from a one-month high of 0.7230 to 0.7165. AUD/NZD fell from 1.0823 to 1.0749.
Commodities, Brent crude oil futures fell 0.8% to $66.50, copper fell 0.6%, and gold rose 0.4%, while iron ore rose 5.9% to $187.85, - a ten-year high – as supply struggles to meet strong Chinese demand. The bi-monthly GDT dairy auction resulted in little overall price change, whole milk powder up 0.4% (futures market had predicted a 2% rise).
Overnight Currency Ranges
AUD/USD 0.7709 0.7816
EUR/USD 1.2023 1.2080
GBP/USD 1.3926 1.4008
USD/JPY 107.97 108.54
NZD/USD 0.7165 0.7227
USD/CAD 1.2479 1.2625
USD/CNH 6.4879 6.5109
AUD/JPY 83.37 84.74
AUD/NZD 1.0751 1.0823
AUD/USD: The market expects the Aussie to consolidate in a 0.7700-0.7800 range, with a positive bias near-term.
The Aussie has looked more fragile in recent weeks with strong resistance at 0.80 and in recent week sliding under 0.7600 for the first time since early February. The market believes an extension to 0.7500 or below is plausible should the US dollar draw support from an economic rebound fueled by a huge fiscal injection and rapid vaccine rollout. Australia continues to run historically very large trade surpluses, with Q1 set to be the 8th consecutive quarter of current account surpluses. A$ should benefit from anticipation of a synchronized global recovery over 2021, especially in Asia. Australia’s coronavirus containment is allowing substantial freedom of economic activity though the RBA’s dovish stance should limit the upside on yields and thus on A$.
Event Risk Data Today
Australia: Westpac-MI Consumer Expectations Index for March up 6.6%; dwelling approvals up 21.6%; and total hours worked up 2.2%, with a 5.8% jump last month also being incorporated into this month's update. Other components have also seen positives: the ASX200 up 1.8%; commodity prices up 1.3% and the yield spread widening 35bps. The combined effect is very likely to hold the six-month growth rate well above trend. The market expects March preliminary retail sales to show a 1.5% decline. A rebound is expected in WA and Vic where lockdowns ended, in contrast another mini-lockdown in Qld that impacted Easter holiday-related activity; and severe floods in parts of NSW (including Sydney) and Qld.
New Zealand: The market expects a 0.7% rise in the CPI in the March quarter. That would see annual inflation slipping back to 1.3%, with the annual rate dampened by changes to tobacco excise taxes. Underlying inflation is being boosted by a combination of higher oil prices, supply disruptions and firm conditions in the construction sector. Ongoing disruptions to trading activity across sectors in the wake of last year’s outbreak continue to cloud the near-term outlook for prices.