Tuesday, 07 March 2017

US, Canada and China Trade Balance, Japan Current Account

The big excitement for today is over already as the Reserve Bank of Australia (RBA) met overnight. The main European indicator of the day, German factory orders, is also likely to be out of the way by the time you read this.

For the UK, the Halifax house price index is expected to show a small rise in prices from the previous month. That could be taken as a good sign, or the fact that it still shows a slowdown in price rises on a year-on-year basis could be taken as a bad sign. Given the way the market views GBP right now, I’d guess the latter and say that this is likely to be negative for the pound.

The final estimate of EU 4Q GDP is coming out. It’s expected to be unchanged from the previous estimate, and if it is, it should have no impact on the FX market.

Come the US opening, we start an unusual cluster of trade figures. The US and Canada announce their trade balance at the same time.

The US is expected to show a very large widening of the trade deficit. Given the Trump administration’s allergic reaction to trade deficits, that could be negative for the dollar. However the impact is probably tempered by the fact that the advance trade report, issued on 28 Feb, showed the deficit at its widest for 9 years, meaning that a poor figure is not likely to be that much of a surprise. (The main difference between the two data series is that the advance figure doesn’t include trade in services, which is usually a surplus for the US. Nonetheless they tend to move very much in line together.)

Canada is expected to show a small drop in its trade surplus, but the fact that it has a surplus in any case may well be considered positive for CAD.

Japan’s current account surplus is expected to plunge on a seasonally unadjusted basis. On an SA basis – which I consider to be the only figure worth considering – it’s expected to fall too, although clearly not by as much. In any event, that could be negative for the yen. Except that…

Japan also announces the second estimate of its Q4 GDP data. Unlike in the case of the EU earlier in the day, this is expected to be revised up, because of the upward revision to private capital investment. The data could suggest that economic momentum is accelerating and counter the JPY-negative impact of the trade data that’s announced at the same time.

Finally, China releases its trade data for February. The trade surplus is expected to shrink dramatically from the previous month as imports rise more rapidly than exports. But since the February data is always distorted by the Chinese New Year (27 Jan-2 Feb this year), the figures are not likely to be that market-affecting, unless they deviate sharply from analysts’ expectations.


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