22 March, 2016
FX News Today
European Outlook: Asian stock markets were mixed, with Japan outperforming and posting robust gains as the Yen weakened following hawkish comments from Fed officials yesterday. U.S. stock futures are down, but U.K. stock futures are moving higher and with the EUR falling against the USD and the front end Nymex future holding above USD 41 per barrel, the DAX may take another attempt at clearing the 10000 mark. The calendar is full today, with Eurozone confidence data in the form of ZEW, Ifo and PMIs and U.K. inflation and public finance data.
Japan flash manufacturing PMI falls: Japan flash manufacturing PMI sank to 49.1 in March compared to 50.1 for the final February reading, registering the first contraction since April of 2015. New export orders shrank at the quickest pace in over 3-year as well, falling from 49.0 in February to 45.9. This stands in contrast to words of optimism Finance Minister Aso, who earlier said that underlying economic fundamentals were firm and there’s no need now for compiling economic stimulus steps. The Yen fell on the news with the USDJPY recovering the 112.00 level it last traded above on Thursday.
Fed’s Lockhart and Williams cautioned that a rate hike in April is possible: This echoes sentiment from Fed Chair Yellen last week, (remember too that Yellen indicated late last year that ALL meetings are live). So this sentiment should not be surprising. However, what is different in these remarks is that Williams has been one of the more dovish on the FOMC until sliding toward the hawkish side late last year, while Lockhart have been a dovish leaning centrist. Such comments, especially in the wake of last week’s policy meeting, where not only was there no further boosts in rates, but the Committee revised down its outlook for the Fed funds rate path for 2016. Such comments will only serve to keep the markets confused and anxious, and won’t help the FOMC’s credibility. June still seems like the better date for the next rate hike.
OPEC says it’s up to Iran: The cartel said Monday that it is up to Iran whether it participates in the oil freeze, given some conditions it has placed on its output, though it may join in the future, said Secretary General El-Badri. He earlier said that all OPEC countries will be invited to the April 17 producer meeting, expressing optimism that the upward price trend will continue, though at this time the only problem is that the market has an overhang of 300 mln barrels. Well, that’s the producer side solved then. NYMEX crude (USOil) traded higher overnight at $41.50 bbl or about 1.5% higher on the session.
Main Macro Events Today
Euro Data: Today brings an almost full round of Eurozone confidence indicators and overall we should see some stabilisation, with especially the ZEW expected to benefit from the prospect of further ECB stimulus. We are looking for a rise in the March ZEW to 4.5 (median 5.0) from 1.0. The Ifo Business Climate reading, meanwhile, is still expected to ease slightly to 105.6 (median 105.7) from 105.7, as future expectations remain depressed by weak orders inflow and falling exports. EMU PMIs on the other hand, could well be mixed again, and we expect the EMU Manufacturing PMI to recover somewhat and rise to 51.4 (median 51.3) from 51.2, while the services reading is seen unchanged at 53.3 (median same), which should leave the composite at 53.0 (median same) also unchanged from the previous month.
UK CPI and PPI: UK CPI for March y/y is announced today with a expectations of and increase to 0.4% from 0.3% in February. This is the most important inflation data from the UK as it is used by the Bank of England as their inflation target. Later PPI input and output data will be release showing changes in the prices at the factory gate. Input prices are likely to rise 0.4% with output prices flat.
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