Asia found the EUR back higher at the open his morning after a few heart-stopping moments for newly-found bullish sentiment yesterday.
Ranges were tight again in a session devoid of data inputs with flows dictating near-term direction. Mild cross-JPY selling out of Japan was the only major item of note which made its presence felt in a slightly softer EUR/USD (back below 1.28) but losses were contained and consolidation was the name of the game through the lunch break.
China’s leading economic index, as monitored by the US Conference Board, indicated further gains in April. The leading index rose 0.8 percent in the month with four of the six components contributing positively to the index. This followed a similar gain in March and a larger 1.0 percent increase in February. The strength in the composite index was mostly concentrated in bank loans and consumer sentiment while manufacturing and real estate sub-sectors showed a significant slowdown. This would tie in with the softer PMI, exports and IP data reported for April and the ongoing impact of real estate measures on property prices.
The China Securities Journal reported that authorities will now fast-track its approval of infrastructure investments in an effort to combat slowing growth and a sluggish property sector. Managers for projects which were scheduled for later in the year are being encouraged to submit proposals by the end of June.
There was also very little in the way of data releases and Greek news overnight, so currency markets were again left at the mercy of order flows for direction. Ranges were relatively tight but we did see EUR test the downside initially, sliding slowly to a 1.2725 low before a better performance across equity markets prompted a u-turn and we squeezed back higher. The shift in sentiment came with more soothing words on promoting growth from German finance minister Schaeuble (also note over the weekend IG Metall, Germany’s biggest industrial union, negotiated the biggest pay rise for members in 20 years – 4.3 percent for 1 year from May 1, which may help boost consumption and confidence in the German economy).
On the data front, eurozone construction output posted a massive rebound in March, gaining 12.4 percent m/m from -10.4 percent, though the 2-month average is close to the flat reading seen over the last few years (note we did see similar wild swings for the same period in 2010). From the US, the Chicago Fed activity index painted a different picture to the Empire manufacturing survey a few days ago with a rebound to +0.11 from a downwardly-revised -0.44 in March. This gave additional impetus to the slight shift in sentiment and Wall St snapped a 6-day losing streak (though Facebook really underperformed, -11 percent). The DJIA closed 1.09 percent higher, S&P +1.6 percent and the Nasdaq +2.46 percent.
Data Highlights
- EU Mar. Construction Output out at +12.4% m/m, -3.8% y/y vs. revised -10.4%/-16.3% prior resp.
- US Apr. Chicago Fed Activity Index out at +0.11 vs. revised -0.44 prior
- NZ Q2 RBNZ 2-year Inflation Expectation out at 2.4% vs. 2.5% prior
- China Apr. Conf. Board Leading Index out at +0.8% m/m vs. +0.8% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- Norway Q1 GDP (0800)
- UK ONS House Prices (0830)
- UK Public Finances (0830)
- UK CPI/RPI (0830)
- US Fed’s Lockhart to speak (1015)
- EU Euro-zone Consumer Confidence (1400)
- US Richmond Fed Manufacturing Index (1400)
- US Existing Home Sales (1400)