FX News Today

Australia Q4 CPI came in a little hotter than expected, rising to 0.4% q/q, above the median forecast for 0.3%. This contrasted last week’s NZ inflation for the same period, which under shoot expectations in falling to 0.1% q/q, propelling AUDNZD to a seven-week peak at 1.0870. The CNY remained steady, while Chinese December data showed industrial profits contracting in December while consumer sentiment ticked up. Moody’s said that Beijing’s policy support in the pursuit of growth in 2016 will have a credit-negative effect of postponing deleveraging and the reduction of excess capacity.

German Feb GfK consumer confidence steady at 9.4, better than expected with Bloomberg consensus predicting a slight decline in the headline number. The full breakdown, available only until January, showed a further improvement in economic expectations to 4.2 rom 2.9 in the previous month, and a marked rise in the willingness to buy, despite a dip in income expectations. This is likely related to a renewed decline in the willingness to save, which is hardly a surprise considering the low interest rate environment. With the government trying to urge consumers to build up private pension portfolios, this can also have negative long term consequences, however, even if for now the numbers suggest ongoing support from consumption to domestic demand and overall growth. Price expectations remain firmly in negative territory, but are unchanged from the previous month.

China industrial profits sank 2.3% y/y for the Jan-Dec period according to China’s Statistics Bureau, while December industrial profits fell 4.7% y/y due to high costs and tight liquidity curbing companies’ production and operations. Though interest rate cuts had a positive effect in reducing companies’ operating costs, weak demand caused slow growth in production and sales in 2015. That contrasted 3.3% growth in 2014. This is about par for the course after GDP growth slowed to 6.9% last year.

 

Main Macro Events Today

• EIA Crude Oil Stocks Change: the oil inventories are expected to have decreased to 3.452 M from 3.979M. Yesterday The Wall Street Journal reported that Petroleum Institute data showed crude oil inventory had a larger than usual weekly build. This contradicts the consensus expectation.

• US New Home Sales: December new home sales are out Wednesday and should reveal a 2.0% headline increase to a 500k (median 505k) pace after the 4.3% November climb to 490k. Other housing measures have been mixed for the month with starts easing to 1,149k from 1,179k in November and existing home sales climbing 5.460 mln from 4.760 mln.

• The FOMC meeting: FOMC began its meeting yesterday, and will release its policy decision today at 14:00 ET. The Fed won’t announce another rate hike after last month’s liftoff. And there’s unlikely to be any explicit forward guidance in terms of the March meeting. It will be important, though, to gauge the tone of the policy statement for clues on the timing of the next move. We doubt the Committee will follow the more dovish lead from the ECB, BoJ, and BoE. However, the poor start to 2016 for equities and commodities, the downward revisions to global growth, and the likely delay in inflation reaching the 2% inflation target could give weigh on the confidence of the more dovish policymakers.

Janne Muta

Chief Market Analyst

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