Trade balance figures out of Australia and promising manufacturing data out of Europe, combined to create a healthy environment for risk assets. Major equity markets throughout the region were in the green, at the same time the dollar faced a wave of sellers in the FX market.
Australia posed a surplus of AUD 1709 million in December, significantly higher than estimates of AUD 1200 million. Behind the increase was a 2% jump in exports, stemming from increased demand from Australia’s Asian trading partners. On the other side of the equation, imports increased 1% on the back of improving domestic demand.
Overall, the figures bode well for the Australia economy. Increasing levels of domestic demand mean the economy is showing some resilience to conditions in Europe that are threatening to weaken global growth. Furthermore, the pick-up in demand for Australian goods paints a good picture for the Asian region as a whole. We also believe that the expected policy loosening cycles in Australia and throughout Asia during 2012 should continue to help demand for Australian resources.
Also out of Sydney, were Australian building approval data at -1.0%m/m, lower than the expected 2.0%m/m gain. Nevertheless, this is not that surprising given the how volatile this number has been historically.
Recent data surrounding the Australia economy has weakened the case for a rate cut next week, but not eliminated it. We still think the bank will make it three in a row, even though last week’s CPI data failed to solidify a cut. Offshore conditions still pose a risk to global growth, which is what trigged the RBA to move twice last year, at the same fairly stagnant domestic growth during the first half of 2012 should keep inflation in check. Also, AUD is climbing fast which could hamper trade-exposed industries.
AUD/USD was sent higher on the back of the trade data out of Australia, the pair even managed to break through 1.0750. However, the run of stops that pushed it higher ended and the aussie soon started to slip against the dollar. The small run in AUD sent EUR/AUD below 1.2300, but the pair failed to sustain a breakthrough of a support level at around 1.2260.
In New Zealand, commodity prices rose 1.2 from December according to ANZ, representing the first advance in eight months. Leading the charge was dairy, aluminium and lamb prices which are being bolstered by increased demand from Auckland’s trading partners. The kiwi didn’t react significantly to the news, but it did manage to ride overall risk-on sentiment and storm through 0.8200 against the dollar. NZD/USD has been pushed higher by over 7% ytd, making the kiwi the strongest performing currency against the buck amongst the G10.
Ahead in the London session, we have a slew of data being released, such as unemployment claims and preliminary nonfarm productivity expected to come in at 371K and +0.8% respectively. Out of Europe, we have construction PMI data out of the UK (exp 52.5) and the PPI figure for the Eurozone (exp -0.1%m/m).
Australia posed a surplus of AUD 1709 million in December, significantly higher than estimates of AUD 1200 million. Behind the increase was a 2% jump in exports, stemming from increased demand from Australia’s Asian trading partners. On the other side of the equation, imports increased 1% on the back of improving domestic demand.
Overall, the figures bode well for the Australia economy. Increasing levels of domestic demand mean the economy is showing some resilience to conditions in Europe that are threatening to weaken global growth. Furthermore, the pick-up in demand for Australian goods paints a good picture for the Asian region as a whole. We also believe that the expected policy loosening cycles in Australia and throughout Asia during 2012 should continue to help demand for Australian resources.
Also out of Sydney, were Australian building approval data at -1.0%m/m, lower than the expected 2.0%m/m gain. Nevertheless, this is not that surprising given the how volatile this number has been historically.
Recent data surrounding the Australia economy has weakened the case for a rate cut next week, but not eliminated it. We still think the bank will make it three in a row, even though last week’s CPI data failed to solidify a cut. Offshore conditions still pose a risk to global growth, which is what trigged the RBA to move twice last year, at the same fairly stagnant domestic growth during the first half of 2012 should keep inflation in check. Also, AUD is climbing fast which could hamper trade-exposed industries.
AUD/USD was sent higher on the back of the trade data out of Australia, the pair even managed to break through 1.0750. However, the run of stops that pushed it higher ended and the aussie soon started to slip against the dollar. The small run in AUD sent EUR/AUD below 1.2300, but the pair failed to sustain a breakthrough of a support level at around 1.2260.
In New Zealand, commodity prices rose 1.2 from December according to ANZ, representing the first advance in eight months. Leading the charge was dairy, aluminium and lamb prices which are being bolstered by increased demand from Auckland’s trading partners. The kiwi didn’t react significantly to the news, but it did manage to ride overall risk-on sentiment and storm through 0.8200 against the dollar. NZD/USD has been pushed higher by over 7% ytd, making the kiwi the strongest performing currency against the buck amongst the G10.
Ahead in the London session, we have a slew of data being released, such as unemployment claims and preliminary nonfarm productivity expected to come in at 371K and +0.8% respectively. Out of Europe, we have construction PMI data out of the UK (exp 52.5) and the PPI figure for the Eurozone (exp -0.1%m/m).