April 17 2017

Apr. 16, 2017 (Commerzbank AG) – Euro area – Sentiment still upbeat, but what does this mean?

Due to the Easter holidays, the current edition of Week in Focus is a shortened version. The next regular edition will be published on Friday, April 21.

We wish all our readers happy Easter!

Preview – The week of 17 to 21 April 2017

The purchasing managers‘ indices (PMIs) ought to have maintained their high levels in April. So far, however, upbeat business sentiment has not been confirmed by a corresponding increase in “hard” data.

We nonetheless stick to our view that a “sentiment bubble” is unlikely and therefore believe that production will rise in the months ahead.

In China, the economy should again have expanded by 6.8% in the first quarter.


USA 

Apr. 14, 2017 (Tempus Inc.) – The U.S. dollar is still reeling after a sharp sell-off yesterday afternoon. The Bloomberg Dollar Spot Index dropped below its 200 day moving average after President Donald Trump said the dollar is “getting too strong.” Many analysts have labeled the comments as “verbal intervention” to weaken the greenback. In the same interview he reversed previous promises that he would label China a currency manipulator and that Fed Chair Janet Yellen is “not toast” when her term expires next year. With no other risk events on yesterday’s docket, traders were forced to react to the President’s comments.

We will also continue to keep an eye on geopolitical risks in Syria and Korea.

Today’s data releases are unlikely to help the greenback. Wholesale prices in the U.S. declined in March for the first time since August of 2016. The print shows a lack of inflation pressures and will keep pressure off of the Federal Reserve to raise rates at their next meeting in May. Headline PPI decreased 0.1% following a 0.3% advance in the prior month. Later, the University of Michigan consumer sentiment print is expected to show a slight dip in April to 96.5 from 96.9 in the month prior.

AUD

The Australian dollar was the big winner overnight, gaining almost a full percent against the U.S. dollar. The Aussie was buoyed after data showed full-time jobs climbed the most in almost 30 years last month. Overall, employment rose 60,900 in March, beating forecasts of a 20K increase. The Aussie found added support on strong Chinese trade data. Chinese imports increased 26.3% year over year which is good news for Australia as nation relies heavily dependent on exports to China.

EUR

The Euro shot higher yesterday afternoon, benefiting from President Trump’s verbal intervention. The common currency has since given back most of its gains as political uncertainty in France looms over the currency. Inflation prints in France and Germany came in as expected. Inflation across the Eurozone has spiked higher over recent months, but we believe they have reached a peak. We do not expect the European Central Bank to change policy this year.