News and views

Lower US equities set the tone for currencies and commodities on Friday night. The negative sentiment couldn't be pinned on any one event, Greece again in the mix, and India's central bank unexpectedly (one month before their scheduled meeting) raised both their policy rates 25bp, prompted by inflation concerns. The S&P500 rose slightly at the open, but the Indian news marked a turnaround and it closed down 0.5%, forming a bearish key reversal signal. Commodities broadly closed 1.1% lower, oil -1.9%, copper -0.7%, and gold -1.8%. US treasuries closed weaker, the 10yr note adding 1bp and the 2-10yr curve flattening by 2bp.

The US dollar rose from 80.30 to 80.90, near the top of its one month range after an impressive two day bounce. EUR fell from 1.3625 to just above 1.3500, and closed around 1.3520, the session peak an hour after a slightly weaker producer inflation report. GBP suffered a two cent fall to just below 1.5000 where it sits. USD/JPY was directionless between 90.35 and 90.70. Stronger CPI and retail sales reports, with BoC implications, push USD/CAD from 1.0180 to 1.0060, before the equities sell-off saw it retrace the whole move.

AUD traded between 0.9195 and 0.9225 until the fall in US equities saw it fall quickly to 0.9130.

NZD fell from 0.7155 to 0.7066. AUD/NZD pushed higher from 1.2890 top 1.2945.

No US data to report.

German producer price deflation eases from 3.4% yr to 2.9% yr in Feb. The monthly outcome in Feb was flat so the factory price picture remains subdued for now despite rising energy prices and the weaker euro.

Canadian CPI 1.6% yr in Feb. The headline CPI reversed half of its 0.6 ppt bounce in Jan, but the core CPI edged up from 2.0% yr to 2.1% yr, above the midpoint of the Bank of Canada's 1-3% target for the first time since late 2008. However temporary price hikes during the Winter Olympics (such as for accommodation) may have been a factor at play.

Canadian retail sales rose 0.7% in January, with ex-auto sales surging 1.8%. There were gains in six of the eight major categories, with building supplies particularly strong as homeowners rushed to beat the expiry of a tax credit for home improvements. However, the Stats office reported that almost all of the rise in total spending was due to higher prices.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: Immediate direction is unclear. AUD's expected range today is 0.9180-0.9250, while NZD's range should be 0.7100-0.7180.