SD has remained in full retreat overnight, falling against every other major currency against CAD which sank under the pressure of disappointing Canadian economic numbers and the falling oil price. JPY finds itself at the top of the leaderboard ahead of tonight’s Bank of Japan meeting as
AUD and NZD have also been strengthening, rising to retest $0.9000 and $0.8000 respectively ahead of today’s Australian employment report, which could attract a lot of attention.
A big event overnight was the release of the Bank of England’s forward guidance for monetary policy plus its GDP and inflation forecasts. Highlights include:
The bank will not raise interest rates or reduce QE levels until the unemployment rate falls to 7.0% (currently 7.8%).
7.0% is a threshold for further review not an automatic trigger.
QE could be increased again if conditions deteriorate again.
2013 raised to 1.5% from 1.2%
2014 raised to 2.7% from 1.9%
2015 raised to 2.5% from 2.2%
CPI inflation forecasts
2013 2.9% unchanged
2014 raised to 2.4% from 2.1%
2015 raised to 2.0% from 1.9%
Following the announcement, GBP nearly 3.0% while the FTSE fell, indicating that traders have taken this guidance as representing a more neutral to hawkish stance. The unemployment rate threshold is less than 1% away. Recall that tapering talk in the US started in earnest and USD took off back in the spring when the US unemployment rate moved to within 1% of the Fed’s threshold for potential action.
Indices across the region had a rough ride yesterday as seasonal weakness in stocks started to take hold. We could see significant action in stock markets and other China sensitive contracts such as copper through the rest of the week with China trade numbers due today and the main basket of Chinese indicators scheduled for tomorrow.
Corporate News and Earnings Previews
Rio Tinto tops the earnings slate for Thursday. The big miner is expected to earn £2.21 for the first half down slightly from the £2.24 it earned in the back half of 2012. Shares have recently rebounded from £26.00 toward £30.00 but remain way short of their £38.00 52-week high. Expectations appear low, but a lot of big miners have managed to further disappoint by announcing big writedowns or dividend cuts, so risks remain. Any comments related to the bidding for its Canadian Iron Ore business or the outlook on mining taxes in Australia could attract attention from traders.
Earnings reports from major global insurers continue Thursday. Highlights include:
Aviva is expected to earn 19p per share for the first half of the year. Shares had rallied to within striking distance of their 52-week high but have already started to retreat after running into resistance near 380p.
Standard Life has started to slide back from 400p ahead of its earnings report where it is expected to report EPS of 9p down about 12% from last year. A failure to break out on the earnings could generate the right shoulder of an H&S top.
Manulife Financial is expected to report EPS of $0.30 for Q2, up slightly from the $0.28 it earned in the previous quarter. Shares have been steadily climbing since November but have started to stall in the $18.00 to $19.00 range lately.
A number of other senior Canadian companies are scheduled to report tomorrow including telecoms BCE and Telus, Oil producers Canadian Natural and Penn West, plus Canadian Tire and Tim Hortons.
Highlights of overnight announcements include:
Canada PMI 48.4 vs street 57.0 vs previous 55.3
Canada building permits (10.3%) vs street (2.8%)
US crude oil inventories street (1.5mmbbls)
US gasoline inventories street (0.5 mmbbls)
Upcoming significant announcements include:
11:00 am AEST South Korea interest rate decision 2.50% no change expected
11:30 am AEST Australia employment change street 6K
11:30 am AEST Australia unemployment rate street 5.8%
11:30 am AEST Australia full-time jobs previous (4K)
11:30 am AEST Australia part-time jobs previous 14K
TBA China trade balance street $26.9B
TBA China exports street 2.0%
TBA China imports street 1.0%
2:00 pm AESTish Japan interest rate and QE decision no changes expected
7:00 am BST Germany trade balance street €15.0B
8:00 am BST Spain industrial output street (1.2%)
8:30 am EDT US jobless claims street 335K vs previous 326K
8:30 am EDT Canada new house prices street 1.7%