NZ businesses pessimistic for 14th quarter in a row

I guess, given the snow in many parts of the UK yesterday, today will be the proper rebirth of the pub garden experience. Please don’t feel insulted if you braved the cold yesterday but, let’s be honest if you did, you are a bit of a nutter, aren’t you.

As mentioned yesterday, the markets lacked data stimulus, but things got a little livelier overnight. For example, New Zealand business confidence took a hit in the first quarter of the year. A minus 13% reading on the survey is significantly worse than the last report and the 14th straight negative reading, going back to Q4 2017. It seems traders are so inured to the negative data that they failed to react, but GBPNZD is still up a cent and a half on yesterday’s lows.

The contrast with Australia couldn’t be starker. The NAB business confidence index reported a plus 15 reading in March. That’s the sixth positive result in a row after the big drop of the middle of 2020. Nonetheless, the GBPAUD rate is up 1.5 cents from Friday’s lows.

Part of those bounces will be due to the solid growth in the British Retail Consortium survey, which recorded a 20.3% rise in like-for-like shop sales in March, nearly double the previous best month, July 2020. 

Improved UK GDP supports Pound

The other UK data was also strong; construction output was up 1.6% in February, and GDP growth in March was up 0.4%; better than the previous month’s 2.2% contraction but not entirely on par with market forecasts. The pound has pushed the USD up to $1.3770 and EUR up to €1.1550 after the drops at the end of last week. That was tempered because manufacturing and industrial production still declined in February, albeit not as sharply as had been expected.

Huge rise in Chinese imports and exports

On a more global basis, Chinese exports grew 30.6 in March, nowhere near as strongly as forecasters had hoped. However, imports were up 38.1%, nearly double the expected level. That ought to support the Asian and Australasian economies and their currencies.

The rest of the day will include the German ZEW business surveys, which are highly influential for the Euro. We will also see US retail sales and consumer inflation this afternoon. The market uncertainty over the future of the US Dollar is writ large on the EURUSD chart. This pair has been yo-yo-ing between $1.1860 and $1.1925. The bouncing ball pattern has a slight upward trend, suggesting the Euro is winning the battle, but this is not conclusive. Perhaps this afternoon’s data will provide some clarity, but we have at least four federal Reserve Speeches later in the day, so that may well muddy the waters again.

Russian escalation risks USD strength

And a story to watch is the news that Russia is amassing 80,000 troops on the Ukraine border, either to prepare for invasion or to probe at western defence and the UN’s resolve. I have no secret-squirrel insight into the story, but there is a strong chance of USD strength if the situation escalates. The other rising concern is over the increased number of lockdown measures being imposed across Europe to battle another wave of covid. The debacle over the vaccine rollout is biting the EU in the proverbial, and the backlash is escalating. Some are even calling for Brexit style exits from the EU. One to watch for definite.

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