Forex news for Asia trading Monday 20 October 2014
The yen weakened as Japanese stocks had a big (huge) gain on the board after the morning session in Tokyo – the GPIF news cited (of course) as a key driver (see bullets, above). USD/JPY firmed above 107, while EUR/JPY ground higher from an early consolidation above 136.50.
Elsewhere the USD had a more or less sideways session against the GBP, EUR and CHF, all within small ranges. Again, weekend (and Friday) news was the centre of chatter on the market, comments from Rosengren, Williams (see bullets, above).
The USD saw bigger losses, though, against AUD and NZD – the AUD up around 40 points from session lows early on and the kiwi up more than 50 from its session lows. There was some discussion of demand for risk assets but it does seem rather early in the week to conclude this on the basis of the thin Monday Asian trade. China GDP tomorrow should provide a better signpost.
Headlines on Bloomberg reporting on BNZ’s outlook for RBNZ rate hike schedule.
- BNZ says the RBNZ will leave the cash rate on hold at 3.5% until September 2015
- BNZ had previously called for the next hike in March 2015
- Forecasts 0.25% rises in September, October and December 2015
- BNZ says the reason is that the RBNZ will need to be confident that inflation is headed to over 2% before hiking again, and evidence for this won’t be clear until September 2015
Bloomberg on a Moody’s report dated October 17:
- About 300 million metric tons of new and expanded iron ore supply will come on stream over the next few years
- Global steel-production growth in 2014 remains muted with China, the key driver of consumption, continuing to slow
- “Iron ore prices have collapsed,” Moody’s said in the report
- “With slowing global steel-production growth rates, iron ore prices remain vulnerable to the downside and we expect continued volatility.”
- “Downward rating actions for iron ore producers could result as Moody’s reassesses the impact of a protracted pricing weakness”
Says Fortescue Chief Executive Officer Nev Power on October 16, though:
- Stockpiles in China are contracting
- Shows demand is outstripping supply and high-cost production is leaving the market
- Fortescue (the world’s fourth-biggest exporter of iron ore) said shipments rose 66% in the three months to September 30 as it expanded output from Western Australia mines
We have a good amount of data coming out from China on Tuesday, the most important of which will be the estimate for Q3 GDP, to be announced by the National Bureau of Statistics.
Scheduled release time is 0200GMT (21 October 2014).
After the intense market jitters surrounding global growth that really took hold last week, this release is going to be very closely watched.
- The Bloomberg consensus ‘expected’ is +7.2% y/y (prior was +7.5%).
- At 7.2%, it would be the slowest economic growth expansion since the Q1 of 2009.
- The growth target is officially 7.5%, though bouts of weakness have seen officials commenting that somewhere around there (i.e a little lower) would be acceptable.
Some of the recent private forecasts for the growth rate in China over 2014:
Also out from China on Tuesday is:
September retail sales (expected to come in slightly weaker y/y than in August)
- expected is +11.7% y/y, prior +11.9%
Industrial production for September:
- expected is +7.5% y/y, prior was +6.9%
Fixed asset investment
- expected is +16.3% y/y, prior was +16.5%
Via eFX comes the forecasts for EUR/USD, USD/JPY, AUD/USD, NZD/USD, AUD/NZD all the way out to December of 2015 from Westpac:
Check out eFX for more
The Wall Street Journal’s Jon Hilsenrath interviewed John Williams, president and chief executive officer of the Federal Reserve Bank of San Francisco.
Hilsenrath says that William’ “views are often in line with top Fed officials including Chairwoman Janet Yellen”. Williams said:
- The Federal Reserve should end its bond-purchase program (QE) as planned at its policy meeting this month
- Said his outlook for the U.S. economy hadn’t fundamentally shifted lately, despite turbulence in financial markets
- He expects the Fed to start raising short-term interest rates by the middle of 2015
More (bolding mine):
- We still have very good, solid momentum in terms of economic growth
- I see real growth (in gross domestic product) during the second half of this year and next year of 3%
- I see unemployment continuing to edge down, employment growth continuing to be good
- On the inflation front, I still view inflation on a medium-term trend moving back to 2%.
- Clearly the decline in oil prices and energy prices globally is going to have a short-run effect on inflation rates. But I’m not concerned really about a pass through of energy-price declines into underlying inflation trends. The decline in global oil energy prices on its own is a positive for growth in the U.S.
- A lot of people have pointed out changes in financial conditions, specifically currencies relative to the dollar. When you look at a broad-based measure of the dollar on a trade-weighted basis, it hasn’t moved by that much.
There is plenty more from Williams at the (ungated) article, here
Bank of Japan (BOJ) Governor Kuroda comments:
- Japan’s economy continues to recover moderately as a trend
- Effect of sales tax hike on economy likely to gradually ease
- Japan banking system maintaining stability
- QQE exerting intended effects
- BOJ will maintain QQE for as long as needed to achieve 2% inflation in stable manner
- BOJ will adjust policy as needed, looking at upside, downside risks to economy, prices
- Some weakness seen in output
- Core inflation likely around 1.25% for some time
Anyone else getting that deja vu feeling?
Anyway … in other news … Japan’s Minister of Economy, Trade and Industry, Yuko Obuchi has resigned (I had the news on Saturday, all confirmed now).
New Zealand ANZ consumer confidence index for October, -3.4% to 123.4
- 12-month low
- ANZ say, though, its still above long-term average of 118.8
- Current conditions index rises to 124.4 from 124.1
- Future conditions index drops to 122.8 from 130.2
- outlook for economy in five-year’s time fell to lowest since October 2012
- Composite Confidence gauge (which combines both sentiment measures) is still projecting a strong economy into 2015
More from ANZ on the result:
“Undercurrents of heightened volatility abound across international financial markets, with the Ebola scare and nastiness in the Middle East to boot. Domestic candidates denting that feel-good factor include weaker commodity prices, house prices plateauing, a gravity-defying kiwi dollar, albeit somewhat plucked by the Reserve Bank”
Ryan had Federal Reserve Boston President Eric Rosengren’s comments from Friday, here, which included:
- Will only consider changes to bond buying if forecast for the US economy changes
- Too soon to make decision on Fed tapering change, so far US economic data hasn’t shifted enough
His comments are attracting a bit of chatter in Asia this morning.
Bloomberg is highlighting some of his comments, saying that the FT reports:
- Eric Rosengren, president of the Boston Fed, said U.S. Federal Reserve should end its asset purchases on schedule at end of October unless “something dramatic happens,” Financial Times reports
- May not make sense to conduct a big communications amendment – including alterations to the central bank’s promise of low rates for a “considerable time” – at next week’s policy meeting, Rosengren hinted, according to the newspaper
Reserve Bank of Australia (RBA) Christopher Kent, Assistant Governor (Economic), speaking:
- Says inflation to stay consistent with 2 – 3% target
Not much to impact on FX immediately in the speech. The full text is here: Ageing and Australia’s Economic Outlook
Kent oversees forecasting at the RBA & is chief economic adviser to Governor Glenn Stevens
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