Please attribute the following comments to Stephen Innes, senior trader at OANDA Asia Pacific
Overnight, fluctuations in oil prices put risk sentiment on a roller coaster ride during the New York trading session. Despite a dismal start to the day oil prices recovered, pushing higher late in the session, post a report from the Department of Energy that indicated a contraction in oil inventory.
Currency sentiment improved thereafter, along with investors nerves, underscored by comments from the US Treasury Secretary Jacob Lew who said, “Don't expect a crisis response in a non-crisis environment… This is a moment where you've got real economies doing better than markets think in some cases."
US economic data is faltering however, as indicated by Markit’s flash services purchasing manager’s index (PMI) which came in at 49.8 for February, falling 3.4pts. The bears took this report as further evidence of an economic slowdown, which became supportive of currencies like the AUD, which is now attracting investor flow on the back of its interest rate advantage.
Apparently indifferent to the run of suspect US economic data, Richmond’s Federal Reserve President Jeffrey Lacker stated that there was no substantial evidence in the data to alter his rate outlook and fully expects US interest rate hikes through 2016.
The comment took some luster off the Australian dollar, but the pair remains well supported on dips, as commodity prices continue to stabilize and investor sentiment continues to support the unit.
In Australia this morning, the Q4 Private Capital Expenditure (CAPEX) Q/Q rose +0.8% versus -3.0%E. It was the first rise in 12 months, however was mostly ignored in trading of the AUD as outside factors remain the dominant driver.
The USD-Asia basket primarily mirrored the movement of the USDJPY overnight, but adjusted when oil prices recovered after the Department of Energy’s report.
In China, PBOC Officials have stated in an article on the Economic Daily’s website that China could raise its budget deficit to 4%, to offset falling revenue from corporate tax cuts.
In Malaysia, the Bank Malaysia Negara (BMN) has said that core inflation, at 3.6% YoY in January, was higher than market expectations and above the BMN inflation target bands target. The bank indicated that the inflation should not lead to any altering of Monetary Policy given that the region has a weak economic climate.
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