New Zealand dollar recovers today after RBNZ left interest rate unchanged and indicated that it will stand pat till 2017. The RBNZ left the OCR unchanged at 3.5% in March and maintained a neutral bias in monetary stance, noting that the next rate decision could be up or down. The RBNZ projects an unchanged OCR out to 1Q17 with the assumption that there's no significant depreciation of the exchange rate from recent levels. However, it raised concerns over the decline in oil prices on inflation, suggesting that a cut would be needed if oil weakness leads to a decline in medium-term inflation expectations. We expect the RBNZ to keep interest rates unchanged throughout this year. More in RBNZ Suggests Rate To Stay Unchanged Until 2017.
Australian dollar stays in tight range after employment data. Employment grew 15.6k in February, slightly above expectation of 15.0k. Unemployment rate also dropped to 6.3% versus expectation of being unchanged at 6.4%. Also released in Asian session, Japan consumer confidence rose to 40.7 in February, BSI large manufacturing dropped to 2.4 in Q1, Tertiary industry index rose 1.4% mom in January. UK RICS house price balance rose to 14 in February.
A number of economic data are schedule to release today. But main focus will be on US retail sales. The dollar index breached 100 psychological level today and stays firm. Markets are expecting Fed to drop the word "patient" in next week's FOMC statement, opening up the door for rate hike between June and September. The exact timing will depend on economic data releases. And the greenback's reaction to data would likely be skewed to the upside. That is, there will be larger reaction to strong data and relatively muted reactions to minor misses.
Retail sales is US is expected to grow 0.4% in February with ex-auto sales up 0.6%. US will also release import price index, jobless claims and business inventories. Canada will release new housing price index and capacity utilization. Before that, in European session, German will release CPI final, Eurozone will release industrial production and UK trade balance will also be featured.
The latest set of Chinese macroeconomic data sent further evidence of slowdown in the world's second largest economy. Growth in industrial production fell to the Lehman crisis level. Meanwhile, domestic demand remained weak, despite a rebound in exports during in January -February. The downside surprises have led analysts to revise lower their GDP growth forecasts. For instance, Barclays (LONDON:BARC) Capital now expects full-year China GDP to growth by 6.8% , compared with government's target of 7% while Deutsche Bank (XETRA:DBKGn) has decided to retain its forecast of 6.8% growth in 1H15. We expect the PBOC to accelerate monetary easing in coming months as fragile industrial production and fixed asset investment should be alarming to the government. More in Aggressive Easing Needed As Chinese Data Surprised To The Downside.