Chinese president soothes worries

10 April, 2018

With US Producer Prices data on the way this afternoon, and predicted to be largely as expected, the morning session will be dominated by central bankers, as FOMC Member Kaplan and MPC Member Haldane are due to make separate speeches. The US/China Trade War has been dominating headlines, with Chinese President Xi speaking overnight and soothing market worries. He said that China is an open, reforming country that promotes free trade and will stick to this policy in order to succeed. He said that cold war mentality is out of place and dialogue is the way to resolve disputes. He added that China will sharply widen access to the market, will expand imports and lower auto import taxes. He also said that they will strengthen intellectual property protection. The market went risk-on after the speech, USDJPY rising from 106.614 to 107.240. US equity markets regained their losses from the end of the US session and gold fell from 1337.00 to 1330.00

UK Halifax House Price Index (MoM) (Mar) was 1.5% v an expected 0.2%, against 0.4% previously, which was revised up to 0.5%. UK Halifax House Price Index (3m/YoY) (Mar) was 2.7% v an expected 2.1%, against 1.8% previously. This data has been declining since hitting a high of 3.9% in June 2014. This latest release puts the month-on-month reading at a 14-month high, with a strong pick up in the numbers. GBPUSD rose from 1.41020 to 1.41165 following this data release.

The Bank of Canada Business Outlook Survey was published. The capacity pressure indicator has moderated but firms see capacity pressures intensifying over the coming 12 months. Labor constraints continue to be the most prevalent obstacle to firms scaling up operations. Economic slack appears to be mostly concentrated in energy-producing regions. Inflation expectations over the next two years picked up, with over half of the firms expecting inflation to be in the upper half of the 1-3% range. Investment intentions edge down but continue to point to an increase in the next 12 months. The share of firms anticipating strong economic growth in the United States in the next 12 months is near record-high levels. 20.9% of firms said US changes have had an unfavourable impact vs 19.8% prior. USDCAD fell from 1.27535 to 1.27140, moved by this data release.

The ECB’s Praet made a speech, giving the following comments on the economy: Inflation developments remain subdued. Monetary policy will evolve in a data-dependent way. There appears to be a disconnect between growth and inflation. An ample degree of monetary policy stimulus remains necessary.

New Zealand NZIER Business Confidence (QoQ) (Q1) data was released at -11%, with a previous reading of -12%. This is the second reading in a row with a negative headline number, something that hasn’t happened since 2009.

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