Sentiment remained upbeat ahead of tonight’s closely watched US jobs report. The S&P500 is currently up 0.8% (the DJIA made a record high), the defensive US dollar is lower, and most commodities are higher, while bond yields are slightly lower.
Commodities: Oil aside, commodities had a strong session. Brent crude oil futures fell 1.1% to $68.15, copper rose 1.7% to a ten-year high (and just shy of a record high), and gold rose 1.5%, while iron ore rose 5.8% to $201.15 – a record high, and lumber rose 1.7% to a fresh record high.
Overnight Currency Ranges
AUD/USD 0.7701 0.7788
EUR/USD 1.1993 1.2071
GBP/USD 1.3858 1.3942
USD/JPY 109.00 109.42
NZD/USD 0.7185 0.7238
USD/CAD 1.2160 1.2286
USD/CNH 6.4634 6.4882
AUD/JPY 84.26 84.92
AUD/NZD 1.0720 1.0765
The US dollar index is down 0.4% on the day. EUR rose from 1.12000 to 1.2072. USD/JPY fell from 109.40 to 109.00. AUD rose from 0.7740 to 0.7784. NZD rose from 0.7200 to 0.7235. AUD/NZD bounced off 1.0719 to 1.0767. AUD/USD heading towards the top of a multi-week range at 0.7820, with potential to break higher.
US weekly initial jobless claims fell to 498k (est. 538k), but the prior release was revised higher to 590k from 553k, and continuing claims rose to 3.69m (est. 3.63m).
Eurozone retail sales in March rose 2.7%m/m (est. +1.6%m/m), with upwards revisions to prior releases taking the annual rate to +12.0%y/y (est. +9.4%y/y). German factory orders also beat estimates, with a rise of 3.0%m/m (est. +1.5%m/m).
Norges Bank (Norway) left its key policy rates unchanged but again indicated that a rise in rates was likely in H2 2021, given vaccination progress and reduced economic uncertainty.
Bank of England left its policy rates and QE unchanged, although the recent hawkish stance of Chief Economist Haldane was reflected in his dissent on QE: he voted to reduce the target for bond purchases. The BoE did affirm that the pace of bond purchases would slow, as was previously signalled, which the Bank stressed was purely an operational decision that "should not be interpreted as a change in the stance of monetary policy. "The Monetary Policy Report raised near term growth and inflation forecasts and lowered unemployment. Although CPI inflation is seen as rising above 2% in the coming year, it is projected to fall back below 2% into the end of the forecast period. The BoE had a more balanced assessment of risks around their projections and dropped discussion of NIRP.
RBA Dep. Gov. Debelle gave a speech on ‘Monetary policy during Covid’ which outlined the resilience of the Australian economy, and the effectiveness of RBA policy and fiscal policy. Although he largely stuck to the material in the latest RBA Statement, he did state that the RBA would consider the actions of other central banks when reviewing their QE and YCC programmes in July. He repeated that there would be no change in their key rate until at least 2024. Monetary policy actions were thought to have pushed longer maturity bond yields around 30bps lower than otherwise. When questioned on unemployment he said that there was still some way to go in reducing unemployment and that there was only a low possibility of inducing any notable rise in wage inflation.
Event Risk Data Today
Australia: The RBA will release the May Statement on Monetary Policy. The updated forecasts will be closely scrutinised by markets. The April AiG PSI will be published; conditions in the services sector rose 2.9pts in March, to the highest level since June 2018.
China: The April trade balance should pick up after a seasonal dip during Lunar New Year. Meanwhile, foreign reserves should rise in April on a weakening USD. The Q1 current account balance is approaching pre-GFC levels, the series high. At some point on or after 8 May, with the market expecting direct foreign investment figures for April.
US: With the vaccine drive in full swing and the economy showing strong momentum, the coming three months are likely to see strong results for nonfarm payrolls. In April the market is looking for 1.1mn new jobs and believes further upward revisions to prior months could also be seen. This should see the unemployment rate fall to 5.8%. Meanwhile, average hourly earnings should edge up a more muted 0.1%, given the remaining slack in the labour market. March consumer credit is expected to rise $20.000bn, following a strong February print (the largest monthly increase in 3 years).