No doubt most Asian short EUR positions were wiped out yesterday as the single currency staged a dramatic comeback from its early post-election sell-off. There were no real drivers for the rebound though reports of reserve diversification by central banks did the rounds while encouraging words for Greece from EU members may also have helped.
There was more bad news for the Australian economy as March’s trade data showed a widening of the deficit to AUD 1.59 bln, the largest since October 2009, from a revised AUD 754 mln in February. Coal, gas and oil shipments were higher but those for iron ore were lower, resulting in a 2 percent m/m increase in exports. Import costs were driven higher by spending on capital and consumption goods, some linked to the investment boom in the mining sector. AUD fell 30 points versus the US dollar and traded heavy for the rest of the session, along with other risk currencies in a general risk-off mood.
Any improvement in the UK housing sector appears to have run its course with the UK’s RICS house price balance deteriorating to -19 percent from -11 percent, its lowest level in six months. The end of a stamp-duty exemption for first-time buyers tempered demand while renewed concerns of the UK economy and growing talk of a double-dip recession dominating headlines also affected buyer sentiment, RICS commented in an accompanying statement.
ECB’s Weidmann has again reiterated that ECB monetary policy is not a panacea for Europe’s ills and believes the central bank should resist political pressure to do more to tackle the eurozone crisis. Writing in the FT (some say in response to French President-elect Hollande’s desire for a more active ECB) he stressed also that there should be no ambiguity about the temporary nature of unconventional measures. Looks like we will have some more confrontation is this area going forward.
The US session was almost devoid of data, but the one item on the agenda generated a bit of surprise. Consumer credit in the US rose by a staggering $21.4 bln in March, the biggest gain in more than 10 years to hit $2.54 tln. Spending was strong in education and warm weather brought forward spring shopping for automobiles. There may be an element of pre-emptive locking in of student loans as subsidized rates are due to increase from July if Congress does not act. There are some concerns that increased spending on education is a reflection of the difficulty in finding employment.
Data Highlights
- US Mar. Consumer Credit out at $21.355 bln vs. $9.8 bln expected and revised $9.267 bln prior
- UK Apr. BRC Shop Price Index out at +1.3% y/y vs. 1.6% expected and 1.5% prior
- UK Apr. Lloyds Employment Confidence out at -59 vs. -58 prior
- UK Apr. RICS House Price Balance out at -19% vs. -11% expected and revised -11% prior
- AU Mar. Trade Balance out at –A$1.587 bln vs. –A$1.3 bln expected and revised –A$754 mln prior