JPY Current account, Trade, IP in line - GBP Jobless claims jump - EUR German, French CPI lackluster - USD Monthly Budget Statement on tap
The currency markets crept along in Asian and early European trading with EUR/USD, USD/JPY, and GBP/USD barely moving within a 50 point range. The kiwi proved to be the most active after dipping to a session low of .6388 and subsequently jumping back up to .6446 ahead of Thursday's RBNZ meeting.
While the central bank is widely anticipated to hold rates at 7.25%, better-than-anticipated retail sales for the month of July gave NZD/JPY a boost, as the headline figure gained 0.5%. Retail sales excluding autos jumped an even stronger 1.3%, reflecting solid domestic demand, as well as the volatility of consumption figures in New Zealand.
Japanese data was a mixed bag but BOJ member commentary lent strength to the yen, bringing USD/JPY down to a low of 117.54 after the pair tested 118.00 earlier in the session. The BOJ minutes from the August meeting said that the policy board "concurred that, if developments in economic activity and prices followed the Bank's projection presented in the April Outlook Report, it would be appropriate to conduct monetary policy in line with the thinking described in it.
In other words, the Bank would adjust the level of the policy interest rate gradually in the light of developments in economic activity and prices, and in this process, an accommodative monetary environment ensuing from very low interest rates would probably be maintained for some time." This statement is essentially what central bankers have been saying since their July hike to 0.25%.
However, board member Atsushi Mizuno remained ever-the-hawk in an interview with Bloomberg when she said, "Things are in line with our scenario. I want to emphasize that that means fine adjustments will continue to be made to interest rates...We haven't seen signs that the rising momentum of capital spending is easing."
In economic news, the Japanese current account rose slightly higher than anticipated to ¥1809.6B as exports gained a solid 13.6% year over year and the income account surplus rebounded to ¥1224B. A jump in imports, however, caused the trade balance to miss consensus figures, as the surplus posted at ¥950.9B. Meanwhile, industrial production posted unrevised at -0.9% in July, leaving the annual rate at 5.1%.
Cable proved to be as listless as ever, with UK jobless claims unexpectedly dropping 3.9K in August versus consensus estimates of a 4.0K gain. Prime Minister Tony Blair, who has not been a popular figure as of late, made himself the center of an investigation by the UK Office of National Statistics as he clued the markets into the employment result yesterday, when he said, "tomorrow I think we will probably see – for the first time in some months – a fall again in unemployment."
While the claimant data was positive, average earnings growth (ex. bonuses) actually slowed to 3.7%, quelling some inflation concerns following yesterday's jump in CPI figures. The euro was similarly quiet amidst lackluster CPI results out of Germany and France, but the markets will be more anxiously awaiting the Euro-zone CPI figure set to be released on Friday.
On tap today, the US monthly budget statement is anticipated to nearly double to -$65.5B in the month of August from -$33.2B in July. While the greenback should see some volatility upon release, the remainder of the day could remain quiet ahead of advanced retail sales on Thursday and the G7 meeting this weekend.