22 Jan 2014
European Open: Uncertainty from China, Aussie CPI leap, big day for GBP
FXstreet.com (London) -
Jump in Australian CPI
Overnight, the Australian fourth quarter consumer price index numbers saw a big leap. Quarter-on-quarter headline CPI jumped 0.8 percent versus 0.4 percent consensus expectations, bringing year-on-year CPI to 2.7 percent versus 2.4 percent expectations. The big jump in the inflation reading helped lift AUD on bets that is has ruled out the prospect of a rate cut any time soon, boosting AUD’s carry trade draw.
Chinese default concerns
In addition to the unwelcome jump in inflation, Australia will not have been buoyed by rumours coming out of China’s shadow banking system with reports of huge potential defaults from major Chinese trust companies. The threat of large-scale defaults has largely overshadowed the huge reverse repo liquidity injection into the Chinese banking system, which temporarily held down short-dated money market rates. A weaker outlook for China though the fourth quarter and a hold on yuan appreciation will not come as good news for Australia, with the prospect of weakened demand from its largest trading partner.
No change from BoJ
The Bank of Japan meeting ended with no change in the central bank’s easing programme, maintaining its current JPY60-70 trillion expansion of its monetary base. With inflation accelerating towards its 2.0 percent target set out by the BoJ, the hold on the current levels of easing reflects some confidence that it will meet its aims. However, the BoJ did not address the sales tax hike set to kick in on 1 April.
Big day for GBP
This morning sees a slew of data releases for the UK and the release of minutes from the Bank of England’s monetary policy committee’s 10 January meeting. With unemployment numbers expected to show a further drop to 7.2 percent, the minutes will be scrutinised for the MPC’s stance towards the 7.0 percent unemployment threshold below which the BoE has stated that it will consider raising rates.
Bank of Canada to hold rates
The Bank of Canada is expected to hold rates at 1 percent later today. The accompanying report is expected to remain dovish, reflecting worries of weak Canadian inflation and job creation. However, it would take a move from neutral to an easing bias to see the troubled CAD pushed lower.
Jump in Australian CPI
Overnight, the Australian fourth quarter consumer price index numbers saw a big leap. Quarter-on-quarter headline CPI jumped 0.8 percent versus 0.4 percent consensus expectations, bringing year-on-year CPI to 2.7 percent versus 2.4 percent expectations. The big jump in the inflation reading helped lift AUD on bets that is has ruled out the prospect of a rate cut any time soon, boosting AUD’s carry trade draw.
Chinese default concerns
In addition to the unwelcome jump in inflation, Australia will not have been buoyed by rumours coming out of China’s shadow banking system with reports of huge potential defaults from major Chinese trust companies. The threat of large-scale defaults has largely overshadowed the huge reverse repo liquidity injection into the Chinese banking system, which temporarily held down short-dated money market rates. A weaker outlook for China though the fourth quarter and a hold on yuan appreciation will not come as good news for Australia, with the prospect of weakened demand from its largest trading partner.
No change from BoJ
The Bank of Japan meeting ended with no change in the central bank’s easing programme, maintaining its current JPY60-70 trillion expansion of its monetary base. With inflation accelerating towards its 2.0 percent target set out by the BoJ, the hold on the current levels of easing reflects some confidence that it will meet its aims. However, the BoJ did not address the sales tax hike set to kick in on 1 April.
Big day for GBP
This morning sees a slew of data releases for the UK and the release of minutes from the Bank of England’s monetary policy committee’s 10 January meeting. With unemployment numbers expected to show a further drop to 7.2 percent, the minutes will be scrutinised for the MPC’s stance towards the 7.0 percent unemployment threshold below which the BoE has stated that it will consider raising rates.
Bank of Canada to hold rates
The Bank of Canada is expected to hold rates at 1 percent later today. The accompanying report is expected to remain dovish, reflecting worries of weak Canadian inflation and job creation. However, it would take a move from neutral to an easing bias to see the troubled CAD pushed lower.