Most Asian indices are higher today on China’s better than forecast Industrial Production and CPI figures for November; but the uptick in market sentiment has had very little effect on the USD, with both EURUSD and gold locked in restrictive ranges. The only major currency noticeably affected by the news was JPY, which weakened to nearly 89.00 levels against the USD – giving back some of its recent risk-aversion gains. The move was exacerbated by Japanese Consumer Confidence numbers that came out lower than expected at a subdued 39.9 against expectations for 40.7; highlighting that the Japanese economy is still struggling to find a firm footing in the economic recovery.
After yesterday’s striking outperformance of NZDUSD (+1.4% on the day) in the aftermath of the RBNZ policy meeting, we also had some comments out overnight from central bank Governor Bollard suggesting that the market’s reaction was excessive. He noted: “It was a fairly subtle shift, I think there’s been a bit of an over-reaction, especially on the FX markets”. Nevertheless, the currency has managed to maintain much of its ground today, currently trading around 0.7270 levels.
The morning’s data calendar will be light today, with the only release out of Europe being the UK PPI figures. Producer input price rises are expected to continue to outpace output prices, but for the most part we expect GBPUSD to carry on marking out its 1.6200-1.6350 range – as the recent Pre-Budget Report and yesterday’s Bank of England Report have not provided any meaningful catalyst for a break out either way.
This afternoon’s focus will be on US Retail Sales, U.Mich Consumer Confidence, and Business Inventories – but given the market’s meagre participation in USD moves over the last couple of days, we believe there will be a limited effect on most currency pairs.