Intraday Market Thoughts

Housing Worries, RBNZ Hikes

by Adam Button
Apr 23, 2014 23:30

Uneasiness about US and Canadian housing could be going mainstream on fresh signs of weakness. On the day, the Swiss franc was the top performer while the Australian dollar lagged after the weak CPI print. The RBNZ hiked rates as widely expected and maintained a hawkish tone despite last week's soft inflation numbers. 

The big surprise on the day was the miss on US new home sales at 384K compared to 450K expected. Worries about the housing market are beginning to percolate after a series of misses and no signs of a spring thaw. We'll be keeping a close eye on how the story develops.

The market briefly reacted to the report but the 15 pip moves were later erased in a tide of US dollar strength. The Markit manufacturing PMI for April was also slightly weak but that hardly dented dollar sentiment.

The Canadian dollar briefly weakened after the retail sales report. Feb sales rose 0.5% as expected but the prior was revised down. Digging into the figures also raises some questions about housing. Sales in the building materials section were down for the fifth time in six months and furniture sales were down 0.9% y/y. Those are both proxies for home sales and raise fresh questions.

The main event came later in the day when the RBNZ announced a second rate hike this year to 3.00%. The move was entirely expected but a 20% fall in dairy prices and a weak CPI report last week led many to believe the RBNZ would hint at a pause for June.

Instead, the statement focused on upside risks to inflation and NZD/USD climbed to 0.8620 from 0.8585. Wheeler said future hikes still depend on data and made another attempt to jawbone the kiwi, saying the exchange rate is not sustainable.

The remainder of the Asia-Pacific session is light on data. At 2350 GMT, the Japanese corporate service price index is expected to rise 0.7%. The main event will be a day later with CPI data due. 

In today's new set of Premium Insights, a new USDJPY trade was added after the last 2 trades in the pair hit their final targets. EURUSD GBPUSD USDCAD USDCHF AUDNZD and gold trades are all in progress.
Act Exp Prev GMT
Trimmed Mean CPI (q/q)
0.5% 0.7% 0.9% Apr 23 1:30
Weighted mean CPI (q/q)
0.6% 0.7% 0.9% Apr 23 1:30
CPI (y/y)
2.9% 3.2% 2.7% Apr 23 1:30
Trimmed Mean CPI (y/y)
2.6% 2.9% 2.6% Apr 23 1:30
Weighted mean CPI (y/y)
2.7% 2.9% 2.5% Apr 23 1:30
CPI Index Number
105.40 104.80 Apr 23 1:30
New Home Sales (MAR) (m/m)
0.384M 0.450M 0.449M Apr 23 14:00
New Home Sales Change (MAR) (m/m)
-14.5% -4.5% Apr 23 14:00
Manufacturing PMI
55.4 56.0 55.5 Apr 23 13:45
Retail Sales (FEB) (m/m)
0.5% 0.4% 0.9% Apr 23 12:30
Retail Sales ex Autos (FEB) (m/m)
0.6% 0.5% 0.5% Apr 23 12:30
Corporate Service Price (MAR) (y/y)
0.8% 0.7% Apr 23 23:50

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