Fundamental Analysis
EUR
"We continue to believe that the recovery's underlying fundamentals are more resilient than the financial markets have recently suggested, but not so strong as to bring growth back to its pre-crisis flight path"
- Standard & Poor's
German inflation unexpectedly turned positive in March, a sign that domestic demand as well as ECB massive stimulus may be starting to boost price gains. Measured on an annual basis, German CPI rose 0.3%, exceeding forecast for a 0.1% gain and following zero growth in February. German prices, harmonised to compare with other European countries, climbed 0.1% on the year after declining by 0.2% in February. Before the German data, economists had projected that the Euro area's inflation was at minus 0.1% in March, up from a minus 0.2% in February. Eurostat will publish figures later in the day. In March, the ECB projected inflation in the region would accelerate to 1.3% in 2017 and 1.6 % in 2018.
The Euro zone economy is "flying on one engine," according to Standard and Poor's, which cut its growth and inflation forecasts for the region. The rating agency trimmed its growth projections from 1.8% to 1.5% this year and to 1.6% in 2017, citing a "sudden decompression" in the EU economy, which followed months of market turbulence between the end of 2015 and the beginning of 2016. Standard & Poor's also revised its headline inflation forecast to 0.4% for this year versus a previous 1.1% estimate. Inflation in the Euro zone is expected to reach 1.4% next year, slightly lower than the original 1.5% forecast.
USD
"The job market continues on its amazing streak. The March job gain of 200,000 is consistent with average monthly job growth of the past more than four years"
- Moody's
US private companies continue to create new positions, with 200,000 jobs added this month, according to payrolls processor ADP and Moody's Analytics. Economists had expected the ADP National Employment Report to show a gain of 194,000 jobs. However, private payrolls in February were revised down to 205,000 from an initially reported 214,000 surge. The services sector was the biggest contributor to the employment gain, creating 191,000 jobs. The figure, however, represented a decline form 204,000 in February. Increasing employment levels allow US households to spend more lavishly, thereby bolstering economic activity and shielding the world's biggest economy against external headwinds. The report release comes two days prior to a more comprehensive non-farm payrolls report from the Labor Department. Economists anticipate the report to show growth of 200,000 jobs, with the unemployment rate remaining steady at 4.9%. In a speech earlier in the week, F ed Chair Janet Yellen noted that improvement in the labour market over the past two years exceeded all expectations. Nevertheless, Yellen insisted on a slower path and more cautious approach to interest rate hikes amid global economic and financial uncertainties, which pose risks to the world's number one economy. Yet Yellen expected headwinds from slowdown abroad, low oil prices and uncertainty over China to wane and allow the US economy to continue recovering and justify gradual series of rate hikes.
GBP
"Are we seeing Brexit jitters at work now? Whilst UK consumers remain resolutely upbeat about their personal financial situation, concerns about prospects for the general economic situation continue to dampen our mood"
- GFK
The UK consumer confidence declined to the lowest level in more than a year amid fears that Britain might vote to exit the European Union. GfK's consumer-confidence index was at zero in March. A measure of expectations for the economic situation over the next 12 months was minus 12, remaining unchanged on the month and plummeting 18 points from a year earlier. However, consumers were more optimistic about their personal finances. A separate indicator of confidence produced by pollsters YouGov and the Centre of Economics and Business Research levelled off. It came in at 113 in March, up slightly from 112.9 the month before. While consumers are still sanguine on house prices, anticipating them to go up, YouGov's data showed they are more downbeat on business activity in their workplace over the next year. Economists say the government's decision to hold the EU referendum is another, home-grown, threat which is likely to undermine confidence in the ru n-up to the vote on June 23. If voters decide to leave the EU, Britain is likely to suffer a hit to growth, at least in the short term, most economists predict.
The Bank of England said earlier in the week that the prospects for financial stability have worsened as it put the risk of a Brexit at the top of its list of near-term domestic threats.
NZD
"Business confidence remains in the dog house - however, firms are more optimistic about the outlook for their own business and this is a far more important signal for economic direction"
- ANZ Bank New Zealand
Business confidence in New Zealand continued to decline in March, particularly in the agricultural sector. ANZ Bank's business survey showed a net 3% of companies are positive about the prospects for the nation's economy over the coming year, compared with a net 7% in the preceding survey. Optimism remains high in the construction sector amid low interest rates and Auckland's housing shortage, while the services sector is also upbeat. However, the mood in the agricultural sector continued to darken, with a net 46% of firms anticipating conditions to deteriorate, reflecting the impact of lower dairy prices.
While companies were concerned about the New Zealand economy, optimism about their own prospects rose, from a net 26% to 29%, and a net 13% expect bigger profitability in the coming year, compared to 12%. Firms reduced their export expectations to a net 21% from 23% in February. ANZ's composite growth indicator, which combines its business and consumer confidence reports, indicates the economy will grow between 2.5% and 3.5%. At the same time, Treasury forecasts growth averaging around 2.7% a year over the next five years. While the uncertain global outlook remains a concern, Treasury secretary Gabriel Makhlouf said the domestic economy was strong, supported by record visitor and migrant arrivals and low interest rates.
