Forex Market Overview
The US stock market finished somewhat lower as a dip in healthcare shares overshadowed a series of positive corporate earnings. Moreover, upbeat economic data from the United States and China also supported the stock markets.
Quick Update on Chinese Policy & Economic Events
Since the beginning of the year, the Peoples Bank of China (PBoC) has injected unprecedented amounts of credit and massive fiscal stimulus into the Chinese economy. The total cost during Q1 has been close to USD 800 billion, or 9% of their 2018 GDP.
The manifestation of this credit impulse was illustrated in yesterday’s batch of stronger-than-expected economic data.
The Chinese National Bureau of Statistics reported that Industrial Production jumped 8.5% on a year-on-year basis compared to a forecasted 5.9% pace, Retail Sales rose 8.7% versus an 8.5% estimate and GDP matched the Q4 performance of 6.4% on a year-on-year basis.
The official narrative from the PBoC is that after a rocky start to 2019, the addition of further large-scale targeted stimulus has boosted domestic investment, lifted consumption and reignited the manufacturing sector.
How it’s Impacting the Market?
The impact of the better data was to lift the AUD/USD back over .7200 for the first time in a month and underpin the EUR/USD over the initial support level of 1.1280.
However, as optimistic as these data may appear for a turnaround in Chinese growth, the domestic bond markets have been pricing in the potential for tighter credit conditions, which reflect a more hawkish tone from the PBoC going forward.
Bond Yields & China’s Monetary Policy
Moreover, after the much anticipated cut to the reserve ratio from the central bank did not materialize earlier this month, the overnight repo-rate has almost doubled from 1.5% to a four-year high of 2.95%, and the 10-yr bond yield has risen by 30 basis points to 3.40% over the last two weeks.
Besides this, the investor focus still stays on the earning per share reports from the US companies, here’s a list of companies looking to release EPS.
- American Express (AXP)
- BB&T (BBT)
- Check Point Software (CHKP)
- Citizens Financial Group Inc (CFG)
- Danaher (DHR)
- Dover (DOV)
- Genuine Parts (GPC)
- Honeywell (HON)
- Intuitive Surgical (ISRG)
- KeyCorp (KEY)
- PPG Industries (PPG)
- People’s United (PBCT)
- Philip Morris (PM)
- Regions Financial (RF)
- Schlumberger (SLB)
- Snap-On (SNA)
- SunTrust Banks (STI)
- Synchrony Financial (SYF)
- Travelers (TRV)
Key Fundamentals to Watch Today
- UK – Retail Sales m/m – 8:30
- Canadian – Core Retail Sales m/m 12:30
- US – Retail Sales m/m 12:30
The above time is in GMT. Let’s keep an eye on the economic events to capture some movement in the market. Enjoy your session!