Coming up in today’s London session will be PMI data releases from throughout Europe, followed by comments from Fed’s Bullard late in the session. As always on Mondays kick start the week with my prepared currency update below.
USD: Minutes from the April 26-27 meeting were hawkish and woke the market up to the chance of a hike in June; Fed Fund futures jumped from 12% to 33%. CPI for April came in close to estimates across the board with Core CPI at 2.1% y/y. NFP for April missed on the headline figure at 160k vs 202k expected. However, Average Hourly Earnings came in as expected at a solid 0.3% rise for the month, which bodes well for the inflation picture and prompted some upside in the USD post release.
EUR: Inflation data for April printed in line with expectations, pushing the Eurozone back into deflation. CPI y/y printed at -0.2% with Core CPI printing at 0.7%. Flash GDP for Q1 missed expectations at 0.5% q/q versus expectations of 0.6%, and at 1.5% y/y versus expectations of 1.6%.
GBP: Average Weekly Earnings for March increased by 2.0%, above expectations of 1.7%, Claimant Count Change also beat expectations, decreasing by 2,400 vs an expected increase of 4,000. CPI data for April missed estimates across the board with CPI y/y declining to 0.3%, below expectations of remaining unchanged at 0.5%, core CPI y/y missed at 1.2% versus expectations of 1.4%.
AUD: The minutes from the May 3 meeting showed the RBA considered waiting for more data before cutting rates. The RBA’s Statement on Monetary Policy cut inflation forecasts, cementing the chance of future rate cuts. RBA cut the OCR to a new low of 1.75% on May 3. The Bank had clearly signalled their intention to do so in the prior decision statements, if inflation moved lower. CPI for Q1 missed by a wide margin with Trimmed Mean CPI printing at 1.7% y/y, below expectation of 2.0%.
NZD: Inflation Expectations for 2 years out sit at 1.64%. The FSR showed concerns over rising house prices but failed to introduce any new macroprudential controls, which suggests the RBNZ will remain on hold in June. Q1 employment was mixed with the jobless rate rising to 5.7% but job growth smashing estimates at 1.2% q/q.
CAD: Core CPI for April rose by 2.2% y/y versus expectations of 2.0% and by 1.7% for headline CPI y/y in line with expectations. A neutral to weakly-bullish currency, with sentiment in lock-step with WTI.
JPY: The BoJ kept policy unchanged at the April 28 meeting, which saw massive strength in yen across the board, given the market pricing for a potential announcement of further easing. The BoJ may ease further at the next meeting on June 16. Tokyo CPI Ex-Food & Energy for April was at 0.6% y/y. The BoJ measure of National Core CPI remained steady in at 1.1% y/y for March.
CHF: CPI beat estimates for April, printing at 0.3% m/m, above the 0.1% expected. Fundamentally a weak currency, highly correlated with moves in EUR.