Currencies Marking Time Ahead of Key Central Bank Meetings

April 3, 2013

The dollar is unchanged against the euro, Swiss franc, yuan and sterling.  The greenback has risen 0.1% relative to the yen and Aussie dollar but dipped 0.2% versus the kiwi and by 0.1% against the loonie.

The Japanese Nikkei rebounded from a 1.1% drop on Tuesday with an impressive 3.0% leap on Wednesday, as the Bank of Japan Board began a two-day policy meeting.  A major stimulus initiative is anticipated at this first Board meeting of the Kuroda era.

Japan’s service-sector PMI reflects considerably euphoria brought on by the election of an activist pro-growth government.  The service-sector index jumped 2.9 points to 54.0 in March and was 5.1 points better than six months earlier.  The composite services and manufacturing PMI was 53.2 in March versus 50.2 in February and sub-50 territory prior to January.  These data hint that economic growth in the first quarter of 2013 will surpass 0.5% or 2.0% annualized.

In other equity market action, shares fell by 1.9% in Thailand, 1.3% in India, 0.6% in Australia, 0.2% in South Korea and 0.1% in China and Hong Kong but rose 0.5% in Indonesia and 0.4% in Taiwan.  in Europe, stocks are down 0.7% in Spain, 0.6% in Italy, 0.4% in Britain, 0.2% in France and 0.1% in Germany.

The ten-year British gilt yield firmed two basis points, while sovereign bond yields are unchanged in Japan and Germany.

Oil and gold prices have retreated 0.6% to $96.59 per barrel and 0.4% to $1569.60 per ounce.

The Bank of Japan’s verdict will be announced around 05:00 GMT on Thursday.  The Bank of England and ECB also announce policy decisions on Thursday.

Ezone consumer price inflation slowed to 1.7% in March, a 31-month low and comfortably below the ECB target ceiling, from 1.8% in February, 2.0% in January, 2.2% in November and December and 2.7% in March 2012. 

Britain’s construction-sector purchasing managers index printed at a weak 47.2 in March, up from February’s 40-month low of 46.8 but below January’s 48.7 and the 4Q12 average sub-50 reading of 49.6.  British shop prices were only 1.4% higher in March than a year earlier. 

Norway’s manufacturing PMI rebounded in March more sharply than anticipated to a score of 50.1 from February’s 48.4 reading.

Romanian GDP growth in 4Q12 was revised upward to show gains of 0.3% from 3Q and 1.1% on year.

China’s fourth-quarter current account surplus was revised downward by 30.6% from the initial estimate to $45 billion.

The J.P. Morgan global purchasing managers index for manufacturers ticked up 0.3 points to 51.2 in March.

Chinese PMI results in March suggest a growth recovery that is gradually but steadily progressing.  The HSBC services index improved 2.2 points to 54.3, a six-month high, and the composite PMI of the HSBC series was 53.5, matching January’s score after a dip to 51.4 in February.  The government-authorized CFLP service-sector PMI improved to 55.6 from 54.5 in February.  Scores above 50 connote expansion.

The PMI picture in India was discouraging, in contrast to China.  A services index of 51.4 was the lowest rate of expansion since October 2011, and the composite PMI reading, also 51.4, was down from 54.8 in February and 56.3 in both December and January.

Russia’s PMI results reflect uneasiness over Cyprus.  The services index, 54.6, was at a six-month low, and the composite reading of 53.4 was at a 7-month low, but to put a positive spin on these results, they are still in line with long-term averages of this data series.

Hong Kong’s private PMI reading of 50.5 was at a 5-month low and down from 51.2 in February and 52.5 in January. 

Among Middle Eastern economies, the non-oil purchasing managers index of the United Arab Emirates was at a 4-month but still respectable 54.3 in March.  Saudi Arabia’s non-oil PMI edged further upward to 58.9 from 58.5 in February and 58.1 in January.  Egypt’s index, on the other hand, fell from 46.0 in February to 44.8 in March, marking its fourth straight reading of significantly less than 50.

Australia recorded a considerably smaller-than-expected A$ 178 million trade deficit in February after shortfalls of 1.215 billion Aussie dollars in January and 642 million Aussie dollars in December.  Exports rose 3.3% on month, while imports stagnated.  Australian new home sales slumped for the first time in 5 months, dropping 5.3% in February.  Reserve Bank of Governor Glenn Stevens was appointed to an additional term, albeit for only three years.

The Bank of Thailand, as expected, left its policy rate at 2.75%, its level since October 2012.

U.S. mortgage applications dropped 4.0% in the final week of the first quarter after a 7.7% advance in the prior week.  The main U.S. data release today will be the ADP estimate of private sector jobs growth, which analysts expect to be around 200K.  This kicks off a string of labor market data followed by Thursday’s weekly jobless insurance claims and Friday’s full March jobs report.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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