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New Zealand Keeps Official Cash Rate Unchanged At 1.75%



The Reserve Bank of New Zealand on Wednesday kept its Official Cash Rate at the record low of 1.75 percent for the 16th straight meeting.

The decision was in line with expectations following a 0.25 percent rate cut in November 2016.

The central bank has pared a collective 0.50 percent from its benchmark in the last 25 months, lowering the rate in six of the last 22 meetings after six straight sessions with no change.

Given the weaker global economic outlook and reduced momentum in domestic spending, the likely direction of the next OCR move is down, RBNZ Governor Adrian Orr noted.

Employment is near its maximum sustainable level, the bank said. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.
The global economic outlook has continued to weaken, in particular key trading partners including Australia, Europe, and China. This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

Domestic growth slowed in 2018, with softness in the housing market and weak business investment contributing.

"We expect ongoing low interest rates, and increased government spending and investment, to support economic growth over 2019. Low interest rates, and continued employment growth, should support household spending and business investment. Government spending on infrastructure, housing, and transfer payments also supports domestic demand," Orr said.

As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.

The balance of risks to this outlook has shifted to the downside, the bank said. The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending. On the upside, inflation could rise faster if firms pass on cost increases to prices to a greater extent.

"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment and maintaining low and stable inflation," Orr said.

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May will leave in exchange for support of her Brexit proposal



The British Parliament, taking control of the Brexit process, hopes to find a way out of the impasse. On Wednesday, lawmakers will explore alternatives to the prime mnister's project through a series of so-called "demonstrative" votes. The Theresa May Agreement is still a promising option. In addition, there were rumors that she would leave her position as prime minister in exchange for support of her Brexit proposal.

Voting will begin at 19:00, the results are expected by 21:00 London time. It is possible that the ministers will need more time to choose an option they prefer. In this case, the meeting will continue on Monday. Voting may not provide the result that MPs are counting on, but the fact that they have united and challenged the government is already a huge breakthrough.

Meanwhile, the pound, which won back losses against the background of traders' belief in a positive outcome of Brexit, is waiting for the results of a new vote.

Here is what leading strategists wrote:
Credit Agricole CIB
"Despite the fact that political uncertainty is likely to continue, our long-term view remains constructive - the pound will rise to $1.39 by September."

Newton Asset Management
"There is a possibility that MPs will not come to any of the final options, which will further confuse the situation."

European Council President Donald Tusk, who spoke on Wednesday at the European Parliament's plenary session in Strasbourg, said that the British should retain the right to revise Brexit plans and be given the time to do so, that is, agree to a lengthy delay. This means that the UK will participate in European elections.

Results that may follow a series of votes:
Theresa May's proposal that already failed twice will unlikely be passed. Nevertheless, some who oppose the prime minister's unpopular deal and supporters of the "hard" scenario, such as Jacob Rees-Mogg, said that they could change their mind and vote in favor. In this scenario, the likelihood of a disorderly Brexit will decrease, which contributes to the sterling's immediate strengthening against both the dollar and the euro. Although the "hard" Brexit was eliminated twice, legally it remains as the "default" scenario if no agreement is reached by April 12.

The UK remains in the customs union. This will allow the country to conduct free trade, while a single market will be closed. It may also mean that Britain will have to maintain some form of freedom of movement of citizens throughout the eurozone.

One of the versions of Theresa May's proposal is the Malthouse deal. Here, the Irish "backstop" is replaced by "technical solutions", which are currently not defined.

The idea of a second referendum remains.
The simplest option is to abolish Article 50. It is unlikely for it to receive a greater support in the House of Commons. Deputies fear that in this way they will ignore the will of the British, expressed in a referendum in 2016.

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Japan Retail Sales Add 0.2% In February



Retail sales in Japan were up a seasonally adjusted 0.2 percent on month in February, the Ministry of Economy, Trade and Industry said on Friday.
That missed expectations for an increase of 1.0 percent following the 1.8 percent decline in January.
On a yearly basis, retail sales advanced 0.4 percent - again missing expectations for 1.0 percent and down from 0.6 percent in the previous month.
Sales from large retailers tumbled an annual 1.8 percent, missing forecasts for a fall of 1.3 percent following the 3.3 percent slide a month earlier.

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Australia Building Approvals Surge 19.1% In February



The total number of building approvals in Australia jumped a seasonally adjusted 19.1 percent on month in February, the Australian Bureau of Statistics said on Tuesday - coming in at 17,074.

That was way above forecasts for a fall of 1.8 percent following the 2.5 percent gain in January.

On a yearly basis, building approvals sank 12.5 percent - but that also beat expectations for a fall of 27.0 percent after tumbling 28.6 percent in the previous month.

The seasonally adjusted estimate for private sector houses fell 3.6 percent in February, while private sector dwellings excluding houses surged 64.6 percent. The value of total building approved rose 15.4 percent in February.

The value of residential building rose 24.7 percent, while the value of non-residential building rose 2.1 percent.

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Australia Has A$4.801 Billion Trade Surplus



Australia posted a seasonally adjusted merchandise trade surplus of A$4.801 billion in February, the Australian Bureau of Statistics said on Wednesday.

That beat expectations for a surplus of A$3.70 billion and was up from A$4.549 billion in January.

Exports were flat on month at A$39.833 billion. Non-rural goods rose A$127 million, while non-monetary gold fell A$142 million (7 percent) and rural goods fell A$44 million (1 percent). Net exports of goods under merchanting remained steady at A$10 million. Services credits rose A$136 million (2 percent).

Imports fell 1.0 percent to A$35.032 billion.

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The players believed in the euro, but the signal was "bearish"



The euro stopped a six-day decline and increased due to the fact that market participants believed in it. Improving the mood for risky assets is supported by optimism about the deal between the US and China and strong data for China and the eurozone. The euro is rising, while German bonds are falling, and the 10-year yield has risen briefly above zero.
Imports fell 1.0 percent to A$35.032 billion.

The dollar missed the initiative, the EUR/USD pair added 0.45% at $ 1.1252 on Wednesday. The ability to stay above the March lows led to triggering trailing stops, with a huge number being placed above $1.1250. This information was shared with Bloomberg by two traders from Europe.

Purchasing manager indices for the services sector in March surpassed all four major economies in the region. In this regard, some concerns over the decline in production have softened.

Bear slope

Meanwhile, strategists who write for Bloomberg, warned that the general signal for the euro remains bearish for the long term.
It is worth recalling the deeply negative real yield, the high level of debt and the stubbornly slow growth of the region's economy. Factors that could protect the euro, are frankly little, so the currency will weaken in the coming months.

The exception is that the euro will be used as a safe-haven in times of stress due to the region's current account surplus and relatively low currency volatility. However, the current account surplus slightly decreases.

Additional pressure on the single currency will come from parliamentary elections in the European Union in May and early elections in Spain. Political tensions in France and Italy will also add pressure on the euro.

Brexit consequences for Europe

Now they are actively discussing the possible consequences of an exit without a deal. This is dangerous not only for Britain itself, but also for Europe and the world economy as a whole. Investors are forced to admit that the "hard" scenario next week is not only not excluded, but also quite possible.

Goldman Sachs tried to describe the economic effect of Brexit 2.5 years after the referendum. The picture turned out, to put it mildly, alarming.

So, during the week after the referendum, the UK economy lost 2.4% of GDP, or about 600 million pounds. Most of these losses relate to business investment, so the bank is inclined to believe that experts underestimated the effect of political uncertainty.
Brexit every 2.5 years is a major stimulant for the UK markets and investments. In the first quarter of this year, growing uncertainty reduced investment growth by 5% in quarterly terms.

Major investments (airplanes, trains, and equipment) and services (hotels and restaurants) are most severely affected, heightening the threat of recession in the European industrial sector.

Another shock

As noted by the bank, risky assets in the world markets were affected by the referendum's results, especially in Europe. Since an exit without a deal would be another shock, then this situation may happen again.

The "soft" scenario next week will support the UK economy. With a random exit, the European economy will suffer negative consequences for several years.

The strengths of the ECB are not limitless

Of course, the regulator is able to remove the painful symptoms of the initial shock in the financial market. In this case, it will resume buying bonds and reduce the profitability of Italian securities. However, the ECB is unlikely to cope with a third recession over the past 10 years.
Worst of all, the central bank is already backing down, retreating from its plans to tighten policies and promising that it would keep low rates until the end of this year. It turns out that the regulator has a limited arsenal of tools to mitigate the consequences of a negative scenario.

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Euro Mixed Ahead Of German Industrial Production



Destatis will publish German industrial production for February at 2:00 am ET Friday. Ahead of the data, the euro traded mixed against its major counterparts. While the euro fell against the yen, it held steady against the rest of major counterparts.

The euro was worth 125.39 against the yen, 1.1227 against the franc, 0.8564 against the pound and 1.1229 against the greenback as of 1:55 am ET.

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Japan Producer Prices Add 0.3% In March



Producer prices in Japan were up 0.3 percent on month in March, the Bank of Japan said on Wednesday - exceeding expectations for 0.2 percent and unchanged from the February reading.

On a yearly basis, producer prices climbed 1.3 percent - again topping forecasts for 1.0 percent and up from 0.9 percent in the previous month.

Export prices added 0.8 percent on month and 0.2 percent on year, the bank said, while import prices jumped 1.6 percent on month and 2.5 percent on year.

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Japan M2 Money Stock Gains 2.4% On Year In March



The M2 money stock in Japan was up 2.4 percent on year in March, the Bank of Japan said on Thursday - coming in at 1,012.7 trillion yen.

That was in line with expectations and unchanged from the previous month's reading.
The M3 money stock climbed an annual 2.1 percent to 1,344.7 trillion yen - also unchanged from a month earlier and matching forecasts.

The L money stock advanced 2.4 percent on year to 1,794.0 trillion yen, up from the 2.1 percent increase in February.

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What is the main driver for the dollar/yen pair today?


After closing in negative territory for three consecutive days and dropping to a low in April, the USDJPY pair changed direction and rose to its highest point of 111.35

The strong dollar seems to be supporting the pair's recovery today. Against the background of positive statistics, the US dollar index rises above the level of 97.00 today, erasing the losses of yesterday.

According to the results of the weekly report of the US Secretary of Labor, it became known that initial applications for unemployment benefits fell to a low from 1969, by 196 thousand in the week to April 5. In addition, the producer price index rose 0.6% for the month and 2.2% for the year. Both figures were higher than market expectations.

Also, by 0.75%, the yield on 10-year treasurers rises, which serves as an additional impetus for the dollar/yen pair.

Today, the speech of the head of the Federal Reserve Bank of St. Louis, James Bullard is expected, the main topic of which will be the assessment of the market value of the dollar, which is likely to become the main driver for the USDJPY pair.

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NZ Dollar Climbs Amid Rising Risk Appetite On Trade Deal Hopes



The New Zealand dollar strengthened against its major counterparts in the Asian session on Monday amid rising risk appetite, as investors welcomed progress in trade talks between U.S. and China, after U.S. Treasury Secretary Steven Mnuchin said that trade deal would go "way beyond" previous efforts to open China's markets to U.S. companies.
Speaking on the sidelines of the spring meetings of the World Bank and International Monetary Fund this weekend, Mnuchin said that U.S-China trade talks are "close to the final round of concluding issues".
Mnuchin said that the two sides have consented that "the enforcement mechanism works in both directions."
Data from BusinessNZ showed that New Zealand services sector continued to expand in March, albeit at a slower rate, with a Performance of Services Index score of 52.9.
That's down from 53.6 in February, and it marks the lowest index score since 2012.
The kiwi advanced to an 11-day high of 0.6783 against the greenback, from a low of 0.6760 seen at 5:00 pm ET. The next possible resistance for the kiwi is seen around the 0.69 level.
The kiwi that closed last week's trading at 75.72 against the yen firmed to a 2-week high of 75.96. The kiwi is poised to find resistance around the 77.00 level.
The kiwi appreciated to a 4-day high of 1.6677 against the euro, compared to 1.6700 hit late New York Friday. If the kiwi rises further, 1.64 is possibly seen as its next resistance level.
The NZ currency edged up to 1.0582 against the aussie, following a low of 1.0614 touched at 5:00 pm ET. The kiwi is seen finding resistance around the 1.04 level.
Looking ahead, Swiss producer and import prices for March are due at 2:30 am ET.
Federal Reserve Bank of Chicago President Charles Evans will deliver a speech in a television appearance on CNBC's Squawk Box at 8:30 am ET.
In the New York session, New York Fed's empire manufacturing survey for April and Canada existing home sales for March are slated for release.
At 1:00 pm ET, Evans will speak about the economy and monetary policy at the New York Association for Business Economics luncheon.

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Carry trade is back in fashion



In conditions of low volatility, traders once again resort to the help of a carry-trade strategy. Last week, a Bloomberg currency index that measures carry-trade returns from eight emerging markets has increased for the second week in a row. Such dynamics is recorded for the first time in more than two months. At the same time, expected fluctuations in currencies dropped for a second week, according to a JPMorgan Chase & Co volatility indicator.

The lack of volatility in the foreign exchange markets suggests that investors need evidence to accelerate the growth of the global economy. Only then will they begin to enter long positions in EM-assets. Buyers' confidence in improving the state of the Chinese economy seems to be increasing every day. But the data on Wednesday, most likely, will show that the growth rate of the second largest economy in the world in Q1 stalled to 6.3%.

Investors continue to worry about country risks. In India, Indonesia and South Africa, elections are scheduled, Brazil is still trying to implement pension reforms, and Turkey cannot stop the economic decline and high inflation.
Upcoming events

On Wednesday, Indonesians will decide whether to give the current president, Joko Widodo a mandate for a second five-year term or to choose another leader. The official count may take several days. Last month, the rupee became the best in Asia after the Philippine peso.
In Brazil, traders' attention will be directed to the first congressional vote on the pension reform bill. Any postponement of a political event scheduled for Wednesday will be perceived negatively. Markets will focus on the number of votes that supported the bill. The situation with the speaker of the lower house, Rodrigo Maya, will also be in sight, after local media accused him of bribery.

Senior representatives of the Bank of Korea on Thursday will discuss the possibility of a rate cut later this year after an unexpected slowdown in inflation in March. Market participants are already evaluating potential monetary easing. The yields on 3-year government bonds for the first time since 2016 fell below the rate at the end of March.

China is in focus

Along with the GDP report for Q1, China will publish monthly data on retail sales and industrial production. Investors are waiting for growth rates. In addition, on Wednesday comes the first maturity of the medium-term credit line in the amount of 367.5 billion yuan, or $ 55 billion. According to Chinese analysts, this gives the ideal time to adjust the reserve indicators of banks in case of disappointment with the growth statistics. China's securities should benefit from easing trade tensions with the US.

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This April is going to be idle again for the pound



For the second year in a row, the British currency is missing the once-solid seasonal April rally associated with dividend flows. Blame it on the long-suffering Brexit and the risk of participating in European elections. Earlier for more than a decade, the sterling rose in price against the dollar every April. It was a kind of tradition.

The reasons for the pound's growth at this time of year were simple. Local companies repatriated "home" dividends. Most firms are transnational. Not surprisingly, after receiving dividends abroad, they converted them to pounds. This model was absolutely workable and even withstood a powerful shock in the form of the 2008 crisis.

While the pound rose 0.4% in tandem with the US dollar since the end of March, over the past 13 years to 2017, the average sterling grew by 2.3% in April. Last April, the pound approached the peak after the 2016 Brexit, when a referendum was held before turning down. As a result, the GBPUSD pair ended April with a fall of 1.8%.

London has achieved the extension of the country's exit date from the European Union, market concerns about the chaotic "divorce" process have decreased, but this does not mean that the worst is over. Now investors will have to face political risks, such as the upcoming local elections in the UK, and the Brexit deadlock is only delayed. Alarming moods are likely to return and would put even more pressure on the pound. In late April, the British currency may start a new wave of decline.

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Fasten your seat belts: after a lull in the market, a surge of "turbulence" is expected



Despite the global lull in the Forex market, traders do not seem to relax. The bottom, where JP Morgan's world currency volatility index turned out to be, may portend strong fluctuations in the US dollar exchange rate - this has happened three times in the past 25 years. Some currency strategists warn that they should prepare for a surge in market "turbulence."

In the meantime, in the face of declining volatility of key currencies, investors are forced to search every corner of the market in search of profit.

"The lack of serious movement in developed markets means that currency traders should try their luck in the darker corners of the liquid currencies of developing countries," said Peter Rosensstraich of Swissquote Bank.

"Hedge funds have begun to redefine the weight of emerging markets against the dollar," said Philip Ferreira, senior mixed assets strategist at Lyxor Asset Management.

According to Keith Jax, a Societe Generale specialist, using the yen as a funding currency to buy Indian rupee, Chinese yuan or the Philippine peso could bring substantial profits.

Carry trading also looks attractive in a low volatile environment.

"At the beginning of the year, we opened longs for the USD/ZAR pair, since it managed to rally, which took place in February-March. We received about 6% profit on this jump, and I am very pleased with it, "said Allianz investment manager Casper Brzezniak.

"The pound sterling is trading in an even narrower range than its counterparts, since Brexit was postponed until October, and the volatility of the British currency fell sharply. To make money in these conditions, you need to have time to take advantage of short periods of volatility on the news. This strategy can bear fruit if you choose the right range. Timing is also very important," said Scott Thiel of BlackRock Inc.

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South Korea GDP Slips 0.3% In Q1



South Korea's gross domestic product contracted a seasonally adjusted 0.3 percent on quarter in the first quarter of 2019, the Bank of Korea said in Thursday's advanced estimate.

That follows the 1.0 percent increase in the three months prior.

On an annualized yearly basis, GDP climbed 1.8 percent, slowing from the 2.7 percent increase in the previous three months.

Real gross domestic income picked up 0.2 percent on quarter because of an improvement in terms of trade, the bank said.

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Japan Retail Sales Add 0.2% On Month In March



Retail sales in Japan were up a seasonally adjusted 0.2 percent on month in March, the Ministry of Economy, Trade and Industry said on Friday.

That beat expectations for a flat reading and was down from the 0.4 percent increase in February.

On a yearly basis, retail sales climbed 1.0 percent - also beating forecasts for a gain of 0.8 percent and up from 0.6 percent in the previous month.

Large retailer sales were up an annual 0.6 percent, beating forecasts for a drop of 1.8 percent - which would have been unchanged.

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New Zealand Keeps Official Cash Rate Unchanged At 1.75%



The Reserve Bank of New Zealand on Wednesday kept its Official Cash Rate at the record low of 1.75 percent for the 16th straight meeting.

The decision was in line with expectations following a 0.25 percent rate cut in November 2016.

The central bank has pared a collective 0.50 percent from its benchmark in the last 25 months, lowering the rate in six of the last 22 meetings after six straight sessions with no change.

Given the weaker global economic outlook and reduced momentum in domestic spending, the likely direction of the next OCR move is down, RBNZ Governor Adrian Orr noted.

Employment is near its maximum sustainable level, the bank said. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.
The global economic outlook has continued to weaken, in particular key trading partners including Australia, Europe, and China. This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

Domestic growth slowed in 2018, with softness in the housing market and weak business investment contributing.

"We expect ongoing low interest rates, and increased government spending and investment, to support economic growth over 2019. Low interest rates, and continued employment growth, should support household spending and business investment. Government spending on infrastructure, housing, and transfer payments also supports domestic demand," Orr said.

As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.

The balance of risks to this outlook has shifted to the downside, the bank said. The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending. On the upside, inflation could rise faster if firms pass on cost increases to prices to a greater extent.

"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment and maintaining low and stable inflation," Orr said.

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South Korea Industrial Production Gains 1.4% On Month In March



Industrial output in South Korea climbed a seasonally adjusted 1.4 percent on month in March, Statistics Korea said on Tuesday - rebounding from the 3.4 percent contraction in February.
On a yearly basis, industrial was down 2.8 percent following the 3.4 percent annual slide in the previous month.
The index of all industry production was up 1.1 percent on month and down 0.7 percent on year. In February, the index was down 2.6 percent on month and 1.9 percent on year.
The Manufacturing Production Index increased 1.5 percent on month but fell 2.9 percent on year. The Manufacturing Shipment Index gained 2.5 percent on month but fell 1.5 percent on year. The Manufacturing Inventory Index shed 0.6 percent on month but climbed 4.6 percent on year.
The Production Capacity Index added 0.2 percent on month but fell 0.5 percent on year. The Index of Capacity Utilization Rate climbed 1.4 percent on month but lost 2.5 percent on year.
The Manufacturing Average Capacity Utilization Rate in March marked 71.5 percent, which increased by 1.0 percentage points from the previous month. The Index of Services added 0.2 percent from the previous month and 0.6 percent on year.
The Retail Sales Index jumped 3.3 percent on month and 2.4 percent on year. The Equipment Investment Index jumped 10.0 percent on month but tumbled 15.5 percent on year.
The Domestic Machinery Shipment Index in March dropped 15.2 percent on year. The value of Domestic Machinery Orders Received fell 6.7 percent on year.
The value of construction completed at constant prices increased 8.9 percent on month but lost 2.9 percent on year. The value of construction orders received at current prices surged 18.7 percent on year.
The Composite Coincident Index in March added 0.1 percent from the previous month. The Cyclical Component of Composite Coincident Index, which reflects current economic situations, eased 0.1 points from the previous month.
The Composite Leading Index in March gained 0.2 percent on month. The Cyclical Component of Composite Leading Index, which predicts the turning point in business cycle, eased 0.1 points on month.

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Rising oil prices pose a problem for the global economy - Morgan Stanley



According to analysts of the largest bank Morgan Stanley Wealth Management, the markets underestimate the risks associated with rising oil prices. Investors are careless over this fact, although they should purchase low-cost energy stocks to hedge their portfolios so as not to lose.

At the beginning of this week, the situation on the stock markets developed favorably, which is why investors have lost their vigilance, bank experts say. On Monday, April 29, the S&P 500 index updated its record high. The main catalyst for its growth were US data. By the end of March 2019, consumer spending in America rose substantially, and the base rate of inflation, which the Fed carefully monitors, fell to an annual low. This can affect the decision of the regulator about the interest rate, analysts believe. The positive dynamics of the S&P 500 index suggests that investors are satisfied with oil prices, which is not very good, Morgan Stanley believes.

Experts advise market participants not to rest on their laurels, noting that the current rise in oil prices could be a problem for the global economy. If the cost of oil remains at the current level until the end of this year, the consumer price index may exceed 3%, creating a problem for the Fed. At the same time, the purchasing power of the population will significantly decrease, putting pressure on corporate profits and slowing economic growth in China and in emerging markets, Morgan Stanley believes.

Recall that the prices of Brent and WTI crude oil have recently reached their highest level in the last six months. On Tuesday, April 30, Brent crude rose by 1.10% to $ 72.74 per barrel. According to experts, the price of black gold will remain high or continue to grow, if OPEC and its allies extend the term of the agreement on the restriction of raw materials supply. It is possible that a decision will be taken at the next meeting in June of this year.

In the current situation, bank analysts recommend buying cheap oil stocks to hedge their portfolio, especially if so-called "growth stocks" prevail. These include papers purchased for the cyclical recovery of the economy. This will help lower the risks in the future, according to Morgan Stanley.

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Aussie Steady Ahead Of RBA Decision



At 12:30 am ET Tuesday, the Reserve Bank of Australia announces its decision on interest rates. The RBA is widely expected to cut its benchmark lending rate by 25 bps to 1.25 percent.

Ahead of the announcement, the aussie held steady against its major rivals.
The aussie was worth 77.44 against the yen, 1.6012 against the euro, 0.6999 against the greenback and 1.0592 against the kiwi as of 12:25 am ET.

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