Morning Adviser Asia 7/4/2007 1:03:00 AM
USD: Little change in pre-holiday trading Commodity Bloc: RBA result due JPY: More carry warnings, intervention unlikely EUR, CHF: Swiss CPI in line NOK: Weaker PMI survey GBP: Stronger construction PMI BRL: Trade data buoys the real MXN: S&P news supports the currency ZAR: Keep an eye out for the SARB
Commodity Bloc
The RBA rate announcement is due early Wednesday in Australia (2330 GMT Tuesday) but markets are pricing just about zero chance of a hike and only one forecaster on the Bloomberg poll is calling for one. The RBA issues no statement when rates are left unchanged. In data released Tuesday, retail sales unexpectedly fell 0.1% m/m against market expectations of a 0.7% gain, while building approvals declined 5.6% versus consensus of -1.4%. This has knocked about 6-7bp off RBA expectations, but the market still sees a bit less than 50% odds of an August hike and is fully pricing a tightening by year-end. AUDUSD moved lower Tuesday and AUDNZD has fallen to new lows around 1.0921, but with the carry environment stable, AUDUSD and AUDJPY downside are likely to be limited near-term. Moreover, with the AUD benefiting from equity portfolio flows and a healthy M&A pipeline, we continue to favour AUD over NZD to play a growth or pro-carry view going forward. In Canada, the jobs report Friday will be a key focus for the market. We are looking for an on-consensus report, but as recent price action has shown, the CAD is sensitive to downside surprises given how much tightening is priced in for the currency. We continue to see upside risk for USDCAD. Ahead Wednesday, in addition to the RBA rate announcement at 2330 GMT, the May trade balance figure will be released at 130 GMT.
Technical FX
AUDUSD BULLISH Correction Holds Above 0.8333 - Bull Momentum Returns.