USD sinks into FOMC, NZD climbs into RBNZ
I have been wondering for a while now where we would see the impact of the loss of so many high paying oil patch jobs on the US economy and today I finally got an answer. Ford, Whirlpool and Coach all disappointed on at least one of earnings, sales or guidance, confirming a slowdown in consumer spending on big ticket items. This news, combined with a big drop in US consumer confidence reported today and declining durable goods orders (slower business spending) provides more evidence to suggest the US economy is slowing down.
Expectations on US interest rate hikes this year had been based on the expectation that the US would be able to keep up its momentum from last year. The oil crash, slower overseas economies and a higher USD, have made it increasingly difficult for the US to defy gravity. Expectations for tomorrow’s US FOMC decision have now changed significantly with traders now expecting interest rate liftoff to be pushed out from June to September at least, sending USD into reverse.
The USD selloff has taken the lid off a number of markets particularly precious metals, with gold and silver rallying for a second straight day. The weakening USD improves the prospects for US corporate earnings which helped to shore up US indices today. Paper currencies also strengthened today particularly AUD and NZD with NOK, CAD, EUR and GBP also on the rebound. Resource currencies, led by AUD and NZD have benefitted from talk that China could bring in a bond buying program to help its regions restructure their debt.
In addition to USD, NZD has the potential to be particularly active over the next 24 hours. Today’s New Zealand trade balance is the last big data point before tomorrow’s RBNZ meeting. NZD has been gaining ground on both USD and AUD over the last several weeks although it has slipped back a bit against AUD since nearing par earlier this month. The street is not expecting the RBNZ to do anything about rates, but there is a chance of a surprise rate cut if the central bank wants to aggressively knock the dollar back. Last year’s four rate hikes give the RBNZ room to act if it feels the need.
Twitter headlines the slate of companies reporting after US markets close today.
Significant announcements released overnight include:
US consumer confidence 95.2 vs street 102.2
US Richmond Fed (3) vs street (2) vs previous (8)
UK Q1 GDP 2.4% vs street 2.6% and previous 3.0%
Sweden consumer confidence 97.1 vs street 100.8
Sweden manufact confidence 93.7 vs street 102.1
Sweden trade balance SEK 4.2B vs street SEK 2.0B
Sweden producer prices 2.3% vs previous 1.9%
Sweden retail sales 4.6% vs street 3.4%
Upcoming significant announcements include:
8:45 am AEST NZ trade balance street $300M
11:00 am AEST NZ ANZ activity outlook previous 42.2
11:00 am AEST NZ ANZ business confidence previous 35.8
8:30 am BST Sweden interest rate 0.10% cut to (0.35%) expected
10:00 am BST Riksbank press conference
7:00 am BST UK Nationwide house prices street 4.1%
8:00 am BST Spain retail sales street 3.6%
9:00 am BST Norway retail sales street 6.3%
1:00 pm BST Germany consumer prices street 0.4%
8:30 am EDT US Q1 GDP street 1.0% vs previous 2.2%
8:30 am EDT US Q1 personal consumption street 1.7%
8:30 am EDT US core PCE inflation street 1.0%
8:30 am EDT Canada industrial prices street (0.1%)
8:30 am EDT Canada raw material prices street (2.0%)
10:00 am EDT US pending home sales street 5.1%
10:30 am EDT US DOE crude oil inventories street 2.9 mmbbls
2:00 pm EDT US FOMC decision 0.25% no change expected
5:00 pm EDT NZ RBNZ interest rate 3.50% no change expected
9:00 am NZST Thu