Japan will be in focus today with its January national inflation figures (ex food) out at 10:30 AEDT (expecting 1.3%); while the more forward-looking Tokyo (February) numbers are also released. The market will be keen to see if inflation forces have ticked up again and a good number here could help the JPY out of its recent range. At 10:50 AEDT we get Japanese industrial production, which is expected to grew at an annualised rate of 9.4%. Retail sales will also be in play at the same time. Price action favours the bears and we will need to see the pair reclaim the former short-term uptrend around 102.20.
European inflation estimates takes centre stage today for macro traders, especially after slightly weaker German inflation numbers last night. The markets feels inflation should grew at an annualised rate of 0.7%, which is still woefully below the central banks forecasts. If you look at EUR/USD the pair dipped to 1.3643 on the German CPI print, but has since reclaimed the 1.37 handle and traders seem to be happy to trade around this pivot. It’s worth pointing out that a Reuter’s poll out yesterday showed 26 out of 78 economists felt the ECB would cut its refinancing rate by five to twenty five basis points, while only six out of seventy three economists felt they would cut the deposit rate (the rate charged to banks to hold funds with the ECB). I still like shorts here, but short EUR/GBP is looking like the better trade.
After the poor Q4 CAPEX numbers and first estimate of intentions, AUD/USD fell to a low of 0.8904 through European trade. The big miss to capex intensions is worrying, although it will no doubt be revised higher through the coming months. Joe Hockey’s May budget is going to be pivotal for the Australian economy and while the Treasurer has to find more money from somewhere to plug the huge whole left from corporate Australia, if he goes too hard we run the risk of doing severe damage to the economy. If terms of trade head further in the wrong direction and the April inflation report shows signs that inflation has peaked and could fall, then the RBA could easily bring back its easing bias, which would see the AUD offered against a range of G10 currencies. At 11:30 today we get private sector credit numbers out and they should be strong, running at an annualised pace of 4.1%.
We expect a slightly stronger open on the market today and while traders will be watching for follow through selling on Qantas, it will be worth keeping an eye on earnings from Virgin in response to yesterday’s QAN numbers. There is sizeable support for QAN around A$1.10, so shareholders will want to see the stock hold this level. Also on the docket we get earnings from HVN, WOW and JHX.