Daily Morning Report 29.05.2015

The Japanese yen gained in Asia on Friday as investors digested a slew of data on industrial output, prices, spending, and jobs as broadly positive, while the Aussie also gained despite weaker private sector credit demand. USD/JPY changed hands at 123.65, down 0.25%, while AUD/USD traded at 0.7671, up 0.30%. EUR/USD rose 0.11% to 1.060. In Japan, among a slew of data industrial output rose 1.0% provisionally month-on-month, better than the 0.8% gain seen and the first gain in three months. Household spending however fell 5.5% month-on-month in April, while national core CPI gained 0.3% year-on-year, painting a mixed picture on spending and prices. The CPI data comes as the Bank of Japan has reset efforts to boost inflation to sustained 2% from around zero by 2016. The BOJ leadership now aims to hit the 2% inflation target “around the first half of fiscal 2016” but three of the nine policy board members are even skeptical about the new delayed timing. Unemployment ticked down to 3.3% in April from 3.4% a month earlier. In Australia, HIA new home sales for April rose 0.6%, compared to a rise of 4.4% month-on-month for March. ANZ Business Confidence for New Zealand in May fell to 15.7% from the last reading at 30.2% as inflation expectations dropped sharply. NZD/USD traded at 0.7153, down 0.32%, after the survey. The survey comes as the Reserve Bank of New Zealand is watching pricing measures closely and with inflation expectations now at a historical low and pricing intentions falling the chances of an official cash-rate cut increase. “Inflation expectations fell to a historical low. A low headline-inflation rate will be playing a role but it’s notably unusual that expectations are tracking below the inflation target midpoint,” ANZ New Zealand chief economist Cameron Bagrie said. Housing credit in Australia gained 0.5% in April, in line with the previous month, and private sector credit from Australia rose 0.3%, less than the 0.5% gain seen. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased 0.16% to 96.98. Overnight, the dollar was little changed against a basket of other major currencies in quiet trade on Thursday, after the release of U.S. economic reports as expectations for a rate hike by the Federal Reserve in the coming months continued to support the greenback. The National Association of Realtors said its pending home sales index increased by 3.4% last month to the highest level since 2006, easily surpassing expectations for a gain of 0.9%. Year-on-year, pending home sales, rose at an annualized rate of 13.4% in April, blowing past forecasts for an increase of 10.2% and following a gain of 13.5% in February. The data came after the U.S. Department of Labor reported that the number of individuals filing for initial jobless benefits in the week ending May 23 rose by 7,000 to 282,000 from the previous week’s total of 275,000. Analysts had expected initial jobless claims to fall by 5,000 to 270,000 last week. Demand for the dollar continued to be underpinned as economic data released in the past week, including reports on inflation, new home sales, business investment, and consumer confidence all indicated that the U.S. economy is gaining momentum after a slowdown in the first quarter. Expectations that the economy will rebound from the first quarter have supported the view that the Federal Reserve will begin to hike interest rates around September. The euro gained ground after the Greek government said Wednesday it had started drafting an agreement with its international creditors, signaling progress in long-running negotiations to unlock more financial aid. However, European officials subsequently played down suggestions of a deal, saying negotiators still had several issues to address before an agreement could be reached.

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