Ahead Today
G3: RBA Cash rate, Germany Factory Orders, Eurozone Retail Sales
Asia: Philippines Inflation, Taiwan CPI
Market Highlights
Risk sentiment continued to improve at the start of the week, with equity markets up across the board including a 1% bounce in the S&P500 and 1.5% rise in the Chinese ‘A’ shares market, US yields inching lower, but with mixed impact on the US dollar. Some of this was likely a follow-through from last week’s softer than expected non-farm payrolls print coupled with FX intervention by Japan, which both boosted expectations of Fed rate cuts and a concomitantly weaker Dollar.
The data and Fedspeak out so far have been reasonably supportive of risk. NY Fed President John Williams said there will eventually be rate cuts and timing to be based on the totality of data, while lending standards for US commercial and industrial loans remained less tight compared with a year-ago. Meanwhile, Europe’s final estimate of services PMI picked up further to 53.3, confirming the nascent rebound there, while Caixin China’s Composite PMI rose to 52.8 from 52.7.
Regional FX
JPY is somewhat weaker at the 154 handle, but importantly less volatile after the rollercoaster ride last week, as top currency official Kanda said the government does not need to intervene if markets are orderly. We will have the Reserve Bank of Australia’s policy decision today, where markets will watch for any signs of hawkish tilt by the RBA. The data out so far from Australia have been a mixed bag, with the stickier than expected 1Q CPI numbers already leading to markets pricing for a small probability of another RBA rate hike this year.
Regional FX
Asian FX generally traded stronger, with IDR (+1%), THB (+0.7%) and KRW (+0.5%) outperforming, with some slight weakness in CNH (-0.3%). In China, there were more property market easing announcements by local governments, with Shenzhen joining other major Chinese cities by loosening tax requirements and will allow larger families to buy second units in some non-core districts. The latest data showed US$1.3bn of Northbound inflows on Monday, with onshore A shares catching up to moves in global markets. Meanwhile, Indonesia’s 1Q GDP was in line with consensus at 5.1%yoy, supported by private consumption and government spending, but with investment staying soft. We are forecasting a slowdown in growth in Indonesia with the surprise rate hike from BI likely to start weighing on the economy in the quarters ahead.
