The AUD remained the market mover during the Asian session with steady selling in the AUD/JPY cross (probably linked to JPY repatriation flows into financial year-end) sending the AUD/USD below overnight lows, but only marginally so. Profit-taking at lunchtime has since led to consolidation but we still remained below the 1.04 mark. The only Oz data release was second-tier and had little impact on the selling bias. For the record, Australian job vacancies posted a small rebound in February, increasing 0.7 percent q/q after a 3.4 percent fall in January.
Japanese retail sales posted another strong gain in February, rising 2.0 percent m/m after a solid 3.1 percent gain in January. Compared to a year ago, sales were up 3.5 percent, beating the 1.4 percent consensus by a large margin. Large scale retail sales also improved to post the first increase in 7 months, albeit a slower 0.2 percent y/y pace. Cold weather and the extra “shopping” day in the leap year added to the positives but the potential hike in the sales tax and an uncertain global outlook introduced a note of caution about getting too “bulled up” by the data. USD/JPY trickled lower on cross JPY sales, reportedly ahead of the month-, quarter and financial year-end.
In other data, New Zealand’s business community was more upbeat about prospects in March. The NBNZ’s activity outlook indicated 38.8 percent of firms expecting better times ahead, up from the 31.2 percent recorded in February. Business confidence matched the better sentiment, with 33.8 percent of respondents optimistic over the next 12 months compared to 28 percent last month. Employment intentions, profit expectations and investment intentions were all higher within the survey, despite global headwinds and the strong NZD. The NZD edged higher post-data versus the USD but was dragged lower by the AUD sell-off. AUD/NZD did ease off during the session suggesting a slight outperformance by the NZD over its antipodean cousin.
Currency markets encountered a mild risk-off bias overnight with global growth concerns a driver along with weak patches of data. GBP saw the heaviest pressure with a slight downgrade to Q4 GDP numbers (down to -0.3 percent q/q from -0.2 percent, +0.5 percent y/y from +0.7 percent) and reported EUR/GBP buying for the London fix among the factors. The closeness of the Japanese month-, quarter and financial year-end prevented USD/JPY from holding above the 83.0 mark again amid repatriation flow talk.
Commodity currencies slid on lower oil prices as latest data showed building stockpiles and market rumours of the US dipping into Strategic Petroleum Reserve stocks (subsequently denied). Weakness in the AUD was set in motion as Treasurer Swan commented that delivering the promised budget surplus for the next fiscal year will be much harder, given the strong AUD, weakness in certain parts of the economy and slowing mining-related revenue growth. EUR/USD managed to bounce back above 1.33 on a reported EU draft to merge ESM/EFSF bailout funds through mid-2013.
On the US front, durable goods orders rebounded in February (but not enough to take out the previous month’s decline) with a 2.2 percent increase following a decline of 3.6 percent in January though the increase was primarily driven by a jump in aircraft orders. Excluding defense and aircraft orders, the increase was a lower 1.4 percent. Wall Street finished in the red, with lower oil and metals prices encouraging selling of commodity-related shares. DJIA closed down 0.54 percent, S&P and Nasdaq both down -0.49 percent.
Data Highlights
- US Feb. Durable Goods Orders out at +2.2% m/m vs. +3.0% expected and revised -3.6% prior.
- CA Jan. Teranet/National Bank House Price Index out at +0.1% m/m, +6.5% y/y vs. -0.2%/+6.8% prior resp.
- JP Feb. Retail Trade out at +2.0% m/m, +3.5% y/y vs. flat/+1.4% expected and revised 3.1%/1.8% prior resp.
- JP Feb. Lge Retailers’ Sales out at +0.2% y/y vs. -0.3% expected and revised -1.2% prior.
- NZ Mar. NBNZ Activity Outlook out at 38.8 vs. 31.2 prior.
- NZ Mar. NBNZ Business Confidence out at 33.8 vs. 28.0 prior.
- AU Feb. Job Vacancies out at +0.7% q/q vs. revised -3.3% prior.