Global Markets Overview:

  • RBA: Labour market to stay subdued, usually lags changes in economic activity
  • RBA: Slow wage growth to help keep inflation in target band, even with impact of A$
  • RBA: Cash rate could remain at its current level for some time
  • RBA: Past decline in A$ to help economy, though currency still high by historic standards
  • RBA: Indicators positive for consumption, housing investment, exporters, business conditions
  • Chinese Money rate climbs to 2 week high as PBOC Drains funds.  Yuan falls to 6.1831 per dollar in the biggest 3-day drop since 2008
  • China (CNY) House Price Index (FEB): 8.7%, Previous: 9.6%
  • Foreign Direct Investment into China rose 10.44% (Y/Y) in Jan. and Feb. to reach $19.31 bln
  • Asian equity markets are up; Nikkei gained 1.50 % while the Shanghai Composite rose 0.30 %
  • ASX (+0.50 %), Hang Seng (+0.40 %), KOSPI (+0.80 %)
  • Gold continues to suffer as demand for safe-havens decreases; trading at $1361 (-0.90 %)
  • US 10 year yield stands at 2.69

FX Flows/Orders:

  • Strong supply reported from 0.9120 to 0.9140 in AUD/USD
  • Solid bids resting at 0.9065, stops building sub-0.9050 in size
  • EUR/USD has some offers at 1.3950, but with the barrier option there gone, no major selling interest until 1.3975/80
  • Large barrier options noted at 1.40; supply from sovereign names ahead of the level
  • Dealers in Asia saw decent offers at 102.00 in USD/JPY; large stops are resting above that level and through 102.10
  • To the downside, large bids 102.20-25
  • Minor bids in GBP/USD at 1.6620 and 1.66; sizeable stops seen sub-1.6585

Market Sentiment:

Markets rallied yesterday as the sanctions against Russia were mild and will not have direct economic consequences. This can change of course, but traders used this as excuse to prop up risk assets. While markets reacted with relief about the events in the past 48 hours, geopolitical tensions remain present and it will not take much to trigger a sudden switch to „risk-off“. It is hard to identify any clear trends in the current market conditions and thus, fading any extreme moves seem the favorable strategy for now.

Asia picked up the risk-on bias from the previous two sessions, with most of the APAC stock markets trading higher this morning. The RBA minutes did not contain any surprises and it affirmed the bank’s neutral policy bias. The RBA has a better outlook for growth and evidence is increasing for a transition from a mining to a non-mining led one.

The German ZEW and the US CPI release are the key events today, but many traders will pay attention to the BoC Governor speech at 15:40 GMT as well.  Being short the Canadian Dollar has been one of the most popular macro trades in the past few months, but it has been consolidating within a rather tight range recently. Key support levels to watch for are 1.0956 (March 3 low) and 1.0907 (50 % Fibo level of January advance).

Upcoming Events:

  • 09:00 GMT – Italian Trade Balance (2.47B)
  • 10:00 GMT – Euro Zone Trade Balance (13.9B)
  • 10:00 GMT – Euro Zone ZEW Economic Sentiment (67.3)
  • 10:00 GMT – German ZEW Economic Sentiment (53.0)
  • 10:00 GMT – German ZEW Current Conditions (52.0)
  • 11:00 GMT – Russian President Putin speaks to Russian Parliament
  • 12:30 GMT – US CPI MoM (0.1 %) YoY (1.2 %)
  • 12:30 GMT – US Housing Starts MoM (3.4 %)
  • 15:40 GMT – Bank of Canada Governor Poloz speaks
  • 17:45 GMT – Bank of England Governor Carney speaks