18 February, 2016
FX News Today
China’s CPI improved to a 1.8% y/y growth rate in January, slightly slower than expected following the 1.6% y/y rate of increase in December. CPI is gradually accelerating, with January’s growth rate the fastest since August of 2015’s 2.0%. PPI improved to a -5.3% y/y rate of contraction, nearly as expected following the 5.9% y/y rate of decline in December. The climb in annual CPI growth (albeit to still modest rates) and reduction in the pace of PPI decline suggests there could be some stabilization in China’s economy, although policy makers have a long way to go to tame overcapacity.
Australia’s unemployment rate climbed higher in January as full-time employment disappointed and dropped most for three years. This is seen signaling diminishing stimulus from record-low interest rates and a weaker currency. Jobless rate rose to 6% from 5.8% while markets expected the rate to be 5.8%. Employment fell 7,900 from December while consensus forecast was a 13,000 gain.
FOMC minutes: “many” were concerned over increased downside risks, especially amid uncertainties over economic conditions abroad, financial market stability, and inflation. That uncertainty was a large part of the decision not to assess the balance of risks. Further tightening of financial conditions could amplify the downside risks, while recent developments suggested risks were no longer balanced. The minutes noted the encouraging signs in the labor market, but data on spending and production were disappointing. Additionally, oil and commodity price declines and the firmer dollar were seen keeping inflation low over the near term. And there was a wide range of outlooks for the medium term, with recent developments having “many” now seeing a more uncertain outlook on prices, with risks pointed to the downside. The slowdown in China was seen impacting emerging markets, and together could lead to more of a drag on the US There weren’t any major surprises in the minutes given what had occurred prior to the January 26, 27 meeting, and the subsequent policy decision/statement.
Saudi Arabia’s credit rating was cut to A- from A+ by S&P amid the rout in oil, with the outlook revised to “stable” from “negative.” This is the second cut in 6 months as the rating was trimmed to A+ from AA- in late October. The ratings agency said “The decline in oil prices will have a marked and lasting impact on Saudi Arabia’s fiscal and economic indicators given its high dependence on oil.” Oil was trading near $50 at the time of the October review.
Main Macro Events Today
ECB Monetary Policy Meeting Accounts: are due today and contain an overview of financial market, economic and monetary developments. It’s followed by a summary of the discussion, in an unattributed form, on the economic and monetary analyses and on the monetary policy stance. The accounts offer a fair and balanced reflection of policy deliberations.
US Initial Jobless Claims: Claims data for the week of February 13th should reveal an increase in the headline to 274k (median 275k) from 269k last week and 285k in the week before that. Claims data is typically volatile through the holiday season but as we begin to move past that we expect to see the February average improve to 273k from 284k in January and 277k in December.
US Philadelphia Fed Index: February Philly Fed is out today and should reveal a headline increase to -3.0 (median -2.8) from -3.5 in January. The already released Empire Stateindex for February had the headline at a still negative -16.6 from -19.4 in January but the ISM-adjusted measure managed a stronger rebound with a rise to 47.1 from 43.4. Despite the improvements we expect the ISM-adjusted average of all measures to remain at 49 in February, steady from January and matching the three year low for this measure.
Nikkei gained 1.09% after a strong close on Wall Street and with the earnings season starting to overshadow lingering trade jitters at least for now. A weaker...
U.S. trade tariffs tightened market conditions. Coeure said that “while the effects of any tariffs on output and inflation may take time to materialise, falls...
China and Hong Kong alongside other markets were closed for Lunar New Year holidays, which muted trading, but the Nikkei gained 1.19%...
The U.S. currency has been correlating inversely with global stock market direction of late on the causation that risk-on phases have seen investors...
U.S. personal income rose 0.3% in November with spending up 0.6%. The 0.4% increase in October income was not revised. The 0.3% spending increase..
The FOMC meeting is front and center this week following the solid November jobs report on Friday, which provided the final bit of cover for...
Asian stock markets headed south again, as declines and energy and mining stocks led shares lower amid a further drop in metal prices. Concern China’s regulators may limit the flow...
The rout on Chinese bond and stock markets that dominated Thursday’s session faded and the Nikkei managed a 0.12% gain as the yen...
After a couple of panicky moments in global equities over the past week, the markets will keep a wary eye on political developments. In Washington...