Aussie is so far the strongest major currency this month and hit an eight month high against dollar yesterday. While commodity currencies are generally lifted by return of risk appetite, the surge in iron ore price is seen as a factor that gives the Aussie and extra boost. Iron ore had the biggest daily gain of 18.6% as positive response to China's setting of growth target to 6.5-7.0%. Also, there are expectations that Chinese steel mills are planning a short-term boost in production. As noted in our technical report, AUD/USD's break of 0.7384 resistance last week confirmed medium term bottoming and further rise is now in favor back to 0.7849 medium term fibonacci level.
Nonetheless, Aussie retreats mildly today on weak China trade data. Trade surplus narrowed sharply to USD 32.6b in February, nearly half of January's USD 63.3b. That's also sharply narrower than expectation of USD 50.75b. Meanwhile, exports dropped -25.4% yoy and imports dropped -13.8 yoy. The data is weighing down on Asian markets with Nikkei down -206 pts or -1.2%, Hong Kong HSI down -183 pts or -0.9%, China SSE (LON:SSE) own -47 pts or -1.6%. Recent rally in global stocks would possibly take a breath today.
Also released in Asian session, New Zealand manufacturing activity dropped -1.9% in Q4. Australia NAB business confidence rose to 3 in February. Japan GDP was finalized at -0.3% qoq in Q4, upwardly revised. GDP deflator was finalized at 1.5% yoy, unrevised. Current account surplus contracted to JPY 1.49T in January. UK BRC sales monitor rose 0.1% yoy in February. Looking ahead, Swiss unemployment and CPI is the main focus in European session. Eurozone will release GDP revision and German industrial production. Canada will release housing starts and building permits.
In US, Fed vice chair Stanley Fischer noted that "we may well at present be seeing the first stirrings of an increase in the inflation rate." But Fed governor Lael Brainard was more cautious and said that she'd want to "see a pattern, some persistence." And, "given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path,"