Global markets display caution on growth concerns; China trade data in focus
FX Commentary - 8th July, 2012
Global growth concerns kept the balance of risk on the side of caution overnight with yesterday’s Inflation data from China highlighting the risk of further weakness in the region. Official data released showed inflation slowed to a yearly pace of 2.2 percent in June from a previous 3.0 percent, representing the slowest rate of inflation since January 2010. Producer prices fell 2.1 percent on year – both releases were in line with economists’ consensus estimates. Although the latest inflation data suggests further policy easing measures are on the horizon, the dramatic fall in consumer prices has been viewed as a negative precursor ahead of other key releases this week. While China has in the past made no secret about their intention to tame inflation and engineer more sustainable levels of growth, fears the economy is succumbing to the downside pressure driven by persistent anxiety from the Euro area continues to take its toll. Economic data out of Japan yesterday also emphasized weakening global demand showing a significant fall in the current account surplus, while machine orders dropped near 15 percent in May.
European equities extended losses overnight as peripheral bond yields continued to rise, suggesting little faith in EU leader’s ability to contain the crisis. Spanish debt remained out of favor with the benchmark 10-year yield rising back above the 7 percent region considered the ‘bailout zone. ’ Meanwhile, European Council members have resumed talks in Brussels in an effort to iron out the finer points of Spain’s banking bailout. After pledging up to EUR100 billion in rescue funds, members must now reach a consensus on the conditions of the loan with a "memorandum of understanding" required to be agreed to in exchange for financial assistance.
Aussie dollar losses were contained at lows of 101.54 US cents in early European trade, reluctantly grinded higher before meeting resistance just above the 102-handle. At time of writing the local unit is attempting a break above the figure but remains pressured around current levels of 102.5 US cents. We’ve also seen some residual support from higher crude prices with a labor dispute in Norway promoting supply concerns. After touching fresh 2-year lows, the EURUSD followed a similar path but still unable to break out of it current range between $US1.2253 and 1.2325.
The day ahead will see China remain the primary directive for the Australian dollar and risk related assets with June Trade Balance data on the docket at midday. Given recent PBoC policy easing initiatives, there will be a particular focus on changes to imports to gauge changes in domestic demand. Earlier, we have the NAB business conditions index due for release at 11.30am.
Chris Gore
Archived Market Wraps
May 2012
14th May, 2012 - A$ holds above USD parity; RBA in focus
11th May, 2012 - AUD pares post-jobs data gains; Chinese data in focus
10th May, 2012 - A$ slides as Euro-Zone fears escalate; Local unemployment/Chinese trade
9th May, 2012 - Risk currencies lower on European political turmoil
8th May, 2012 - Risk currencies higher; Euro concerns moderate gains
7th May, 2012 - A$ takes a hit as US Jobs/EU elections force safety bid
4th May, 2012 - A$ succumbs to selling pressure on cautious positioning ahead of NFP's
3rd May, 2012 - U.S jobs in focus as ADP data dissapoints; A$ holds its ground
2nd May, 2012 - Aussie dollar stabilises post RBA; markets supported on stronger U.S manufacturing
1st May 2012 - A$ under mild pressure ahead of Chinese PMI/RBA rate decision
April 2012
30th April, 2012 - A$ thrives amid broad based USD weakness; RBA rate decision in focus
27th April, 2012 - Bank of Japan meeting and Japanese data to govern AUD trade direction today
26th April, 2012 - A$ higher on Fed QE expectations/U.S earnings
24th April, 2012 - Political uncertainty and weak data push risk currencies down
23rd April, 2012 - Rates conjecture to guide the way for majors; Local CPI/FOMC in focus
20th April, 2012 - A$ lower as Euro-region/US data force defensive positioning
19th April, 2012 - Pound rises off unemployment data and MPC minutes
18th April, 2012 - Spanish Debt Auction and US corporate earnings drives $A higher
16th April, 2012 - Chinese growth data fails to inspire; A$ under pressure
13th April, 2012 - A$ springs back to life; Chinese growth in focus
12th April, 2012 - Risk assets get some respite after struggling through early April
11th April, 2012 - Euro-region fears spur safety bid
6th April, 2012 - Global Markets still digesting Friday's jobs numbers
5th April, 2012 - Risk assets struggle as Europe weighs down global markets
4th April, 2012 - US dollar higher as Fed dampens stimulus expectations
March 2012
23rd March, 2012 - A$ takes a hit on global growth concerns
21st March, 2012 - A$ succumbs to Chinese growth concerns
20th March, 2012 - Aussie dollar rides on Apple buyback news
19th March, 2012 - The week that was...
16th March, 2012 - Australian dollar treading water above 1.05USD
15th March, 2012 - Aussie dollar continues to struggle
14th March, 2012 - Fed inspires US dollar strength
13th March, 2012 - Solid NFP’s inspire US dollar rally, but will it sway the Fed?
9th March, 2012 - A$ holds its ground; Chinese CPI in focus
8th March, 2012 - A$ regains composure after post-GDP slide; Local jobs in focus
7th March, 2012 - AUD struggles for second straight night
6th March, 2012 - A$ dollar weakens as China adjust growth target
2nd March, 2012 - A$ hanging on to 1.08 US cents
1st March, 2012 - Bernanke fails to inspire; A$ pairs gains.
February 2012
29th February, 2012 - Risk currencies remain steadfast leading up to ECB's LTRO
28th February, 2012 - Volatile overnight currency session sees AUD just fall short of 1.08 USD
27th February 2012 - The week ahead: EUR/USD, AUD/USD, USD/JPY
24th February, 2012 - Euro rises to a 10 week high
23rd February, 2012 - Weak European manufacturing data sees AUD struggle
22nd February, 2012 - Greek bailout fails to sustain risk rally
21st February, 2012 - 2nd Greek Bailout Awaits Rubber Stamp
20th February, 2012 - A$ shines; China cuts banks reserve ratio; Greek bailout imminent
17th February, 2012 - Greek Debt Deal Optimism Drives Risk Assets
16th February, 2012 - Greek Deadline Extension Worries Traders
15th February, 2012 - Late Rally on Wall Street sees AUD Regain Some Composure
14th February, 2012 - Risk Assets Rally
13th February, 2012 - China Data sees Friday AUD Sell-off
