The Bank of England gathered most of the market’s attention, as policymakers cooled hopes for soon-to-come negative rates in the UK. The central bank left its monetary policy unchanged, and even hint slower bond-purchasing. Stocks-frenzy cooled down, but that didn’t prevent Wall Street from rallying. US indexes finished the day with solid gains, with the DJIA flirting with 31,000 and the S&P at 3,860. Commodities, Brent crude oil futures rose 0.8% to $58.90 – a fresh 11-month high, copper fell 0.5%, iron ore rose 4.3% to $158.95, and gold fell 2.3%
Focus shifts to US data, as the country will release the Non-Farm Payroll report.
Overnight Currency Ranges
AUD/USD: 0.7589 – 0.7637
EUR/USD: 1.1955 – 1.2017 (two month low)
GBP/USD: 1.3566 – 1.3698
USD/JPY: 105.15 – 105.49 (three month high)
USD/CAD: 1.2778 – 1.2845
NZD/USD: 0.7147 – 0.7210
AUD/JPY: 80.01 – 80.32
AUD/NZD: 1.0597 – 1.0920
A busy day ahead beginning with the RBA’s updated forecasts later this morning along with the final retail sales figures for December. The Non-farm payrolls report from the US will be published this evening, this will be watched closely by markets which will look for a decline of 50k (median estimate is +100k) which would lift the unemployment rate to 6.8%.
The downside pressure on the AUD/USD continued overnight and it was trading near its lows under 0.7600 late in the session. Demand is expected as close as 0.7580 and again at 0.7540 while offering interest has grown and likely rests between 0.7650/70.
Event Risk Data Today
Australia: The preliminary estimates of December retail trade showed a 4.2% fall, with partial lockdowns associated with COVID clusters in Sydney clearly disrupting activity late in the month. Final estimates will shed more light on the print, including the picture across store-type and states, as well as online sales and sales by business size (f/c: -4.2%). Following this, we will receive Dec quarter real retail sales. Preliminary estimates show nominal sales up 2.5%qtr despite some big monthly swings. The Q4 CPI detail suggests retail prices had a slightly firmer gain in the quarter, particularly for food. Even still, real retail sales look likely to be up 1.5%qtr. RBA Governor Lowe will appear before the House of Representatives Standing Committee on Economics at 9:30am, and then the RBA will release the February Statement on Monetary Policy, which will include their updated and revised forecasts.
US: The rise in initial claims last month points to a further loss of jobs in January Non-Farm Payrolls, albeit one limited in scale. Markets look for a decline of 50k (median estimate is +100k). This would be sufficient to lift the unemployment rate to 6.8%. However, the stronger than expected ADP measure presents upside risk to these forecasts. Average hourly earnings are expected to print at a modest 0.2% in January and will remain modest for the foreseeable future. The December trade balance may bounce back as the surge in imports for the shopping season abates (market f/c: -$65.7bn). Finally, December consumer credit is expected to ease back to 12.000bn; auto-loans have been a major driver of growth in recent months.