Focus of the Tuesday's session was on RBA interest rate decision. As expected, the Reserve Bank of Australia kept its benchmark interest rate unchanged at 1.50%. But the Australian dollar rose nonetheless after the decision, up 0.6% for the day against the U.S. dollar, thanks to Governor Philip Lowe’s optimistic outlook on Australia’s economic growth. In other words, the RBA will not need to cut rates any time soon and the Australian dollar will be firm?
In a statement, Governor Lowe said: „Conditions in the global economy have continued to improve over recent months…The Australian economy is continuing its transition following the end of the mining investment boom, expanding by around 2½ per cent in 2016. Exports have risen strongly and non-mining business investment has risen over the past year. Most measures of business and consumer confidence are at, or above, average. Consumption growth was stronger towards the end of the year, although growth in household income remains low.“
There were no major data releases from Australia by the end of the week but from China Trade Balance, CPI and PPI figures. China's trade balance for February, in Yuan terms, came in at -60.4 billion CNY vs 172.5bn expected and 354.5bn last. Exports came at 4.2% y/y vs 14.6% expected and 15.9% last, while imports were +44.7% y/y vs 23.1% expected and 25.2% last. The data is a slightly negative input for the Aussie, as exports disappoint markets and re-ignite concerns over China’s external demand. The combined January-February trade balance (Yuan terms) stands at: surplus of 293.7bn CNY. Jan-Feb Imports stand at +34.2% and Jan-Fen exports stand at +11% y/y.
Thursday was marked by China's CPI and PPI figures. Broad measures of Chinese inflation diverged in February, as consumer price growth weakened while factory-gate prices surged to multi-year highs, signaling improved productivity and demand in the world’s second-largest economy. The consumer price index (CPI) advanced 0.8% in February from a year ago, after climbing 2.5% in January, the National Bureau of Statistics said in a report on Wednesday. A median estimate of analysts called for an annualized gain of 1.7%. On a monthly basis, CPI inflation declined 0.2%, official data showed. A separate measure of factory-gate prices strengthened unexpectedly in February. The producer price index (PPI) increased at an annualized 7.8%, following a 6.9% advance in January. Analysts expected PPI inflation to rose 7.7%.
This week markets will be looking at:
China's Industrial Production (Tuesday 3:00)
Employment Change/Unemployment Rate (Thursday 1:30)
