Forex news for Asia trading Wednesday 24 May 2017

  • Moody's China downgrade China - FX implications ... intervention?
  • Moody's: No specific timetable for re-assessment of China rating after downgrade
  • ANZ on the China downgrade - "risk of a negative feedback loop"
  • More on Moody's downgrade of China
  • China stocks down around 1%
  • Australia - Construction Work done for Q1: -0.7% q/q (expected -0.5%)
  • PBOC sets USD/CNY reference rate for today at 6.8758 (vs. yesterday at 6.8661)
  • BOJ JGB buying operation in same amounts as previously
  • Bernanke: Improvement in Japan economy, still strong case for 2% inflation target
  • Australian Westpac Leading Index (May): -0.12% m/m (previously +0.08%)
  • Moody's downgrades China
  • BOJ's Kuroda speech - full text
  • RBNZ Governor Wheeler speaking (shhhh - it's a secret!)
  • USD/JPY popping to a fresh high
  • Coming up - its central bank city today
  • Japan - Reuters Tankan survey - manufacturing index down on the month
  • New Zealand Trade Balance (April): 578 m (vs. expected 267m)
  • More from Fed's Harker: June rate hike is a distinct possibility
  • Australia data due today - Construction work done for Q1
  • Fed's Harker: Some smoothing of balance sheet reinvestment may make sense
  • Fed's Harker repeats he sees two more rate hikes this year as appropriate
  • Economic data, Fed, RBNZ & BOJ speakers also, due from Asia today
  • Trade ideas thread - Wednesday 24 May 2017
  • UK PM May says threat level will be increased from severe to critical
  • OIL - private inventory data shows smaller than expected draw for US crude stocks
  • New Zealand: Fonterra raise 2016/17 milk price forecast 15 cents to $6.15/kg (NZD)
  • A heads up for oil traders - inventory data due at the bottom of the hour
  • ForexLive Americas FX news wrap: Dollar catches a bid

Quite an active day for FX news (and some data flow). New Zealand kicked it off with Fonterra lifting its milk price forecast (NZD got a bit of a jump from this, but the range has been small only). That was not the only positive news from NZ, but I'll come back to that.

The UK announced it was lifting its threat level from severe to critical. Official guidelines are that a 'critical' level indicates an attack is thought to be imminent.

Patrick Harker (President of the Federal Reserve of Philadelphia) spoke, from prepared text, in an audience Q&A and finally to the press. None of his comments moved the forex much at all but are in the bullets above.

Back to New Zealand and the April trade balance data - a surplus reported (see bullets above) and a pop again (and again small) for the NZD.

The big news today was courtesy of Moody's, the ratings firm downgraded China (for the first time since November 1989) and altered their outlook on the country:

  • Moody's downgrades China (to A1 from AA3 & changes outlook to stable from negative)
  • More on Moody's downgrade of China
  • ANZ on the China downgrade - "risk of a negative feedback loop"
  • Moody's: No specific timetable for re-assessment of China rating after downgrade
  • Moody's China downgrade China - FX implications ... intervention?

The Australian dollar dropped on the news (it had drifted a touch lower ahead of it and was close to its overnight low as the announcement was made), down to around 0.7460. The PBOC followed up with a weakening of the yuan (but not my much) at the daily mid-rate setting and the Chinese stockmarkets followed lower as they opened.

The AUD came under further pressure on the release of the Q1 'Construction Work Done' data, a miss on expected, but a mixed bag with some positives amongst the negatives:

  • The result will detract from Q1 GDP (due June 7)
  • Engineering Construction was a little brighter, the first quarterly increase (up 2.2% q/q) since Q2 of 2015 (getting a boost from higher infrastructure and a slow down in mining investment decline)
  • A decline in residential building (down 4.6% on the quarter) saw 'building work' down 2.8% q/q (non-residential work was up)
  • Q4 2016 was revised higher
  • On the 'explanation' side of things - some analysts citing wet weather & Cyclone Debbie especially in relation to the residential construction result (the cyclone hit land right at the end of March)
  • Public construction was up 3%

Iron ore futures are lower in China again today too (and rebar, coking coal ... iron ore down more than 6%). As I update this post AUD/USD is around 0.7450 and close to its session low:

USD/JPY popped a little higher in early Tokyo trade but turned around shy of 112.00 to be nearly unchanged on the session as I update. EUR and CHF , too, are both little changed against the USD. Cable is a few points stronger on the session.

After its slightly better early movement NZD/USD is now near its session low. CAD, too, is weak, usd/CAD is above 1.3530 as I update. Gold is little changed.

Regional equities:

  • Nikkei +0.52%
  • Shanghai -0.36%
  • HK -0.11%
  • ASX -0.07%