Yesterday’s NAB Business Survey bolted a stronger 76 handle on to the AUD, the currency finding support through the day and again overnight, trading this morning toward the top of its overnight range, currently at 0.7685/90, up 1.2%.  In the aftermath of the Survey, pricing for a May RBA cash rate cut was wound back 11% points to a 28% chance with 5 bps sliced off the priced-in year ahead cash rate to 1.71%.

Emerging market currencies also found support overnight from better risk-on sentiment, with another push up in oil prices, Brent up $1.81 to $44.64, up 4.23%, WTI up 4½% to $42.17.  Wire services were reporting that Russia and Saudi Arabia had reached consensus on freezing oil output ahead of this weekend’s producer talks.  The LMEX base metals index rose 2.3% (Cu +2.2%, Ni +3.5%), while the Chinese iron ore price also came to the party, up another chunky $2.60/t to $59.22/t, Chinese steel rebar futures up 2.47% and Dalian iron ore futures higher by 4.37%, all supportive of the commodity-linked currency set.

The mood was not dimmed by the IMF cutting its global growth forecast to 3.2% from 3.4% for this year, noting growth “at an increasingly disappointing pace that leaves the world economy more exposed to negative risks”.  The IMF called for a three-pronged policy approach based on structural, fiscal, and monetary policies.  The IMF cut its forecasts equally for the advanced and emerging market economies.

UK inflation surprised somewhat on the higher side, headline CPI better than expected by 0.1% to 0.5% and core CPI better by 0.2% to 1.5%.  This provided some support for Sterling after the release but a Brexit poll released later in the session showing “leavers” outnumbering “remainers” keeping the quid on the back front.

On the other side of the Atlantic, the US NFIB Small Business Optimism index for March, printed a little softer than Feb and expectations of a small lift (A: 92.6; L: 92.9; E: 93.5) adding a little more to the weakening in recent months.  Even so, the risk-on mood saw heavy global bond markets, US 2y Treasuries up 3.6 bps to 0.73% and 10s up 4.7 bps to 1.77%.

San Fran Fed President John Williams – a FOMC non-voter but regarded as in the inner circle (with Yellen and Fischer) – has been speaking of life after the next rate hike, that data over the past few months has been consistent with the Fed’s dual mandate including core inflation still on the right trajectory, that 2-3 rate hikes for 2016 is reasonable.  The tone of those comments seems less worrisome about US economic prospects.

Fellow Fed President Lacker (also a non-voter and a noted hawk) has also been speaking, offering his views that US economic strength makes policy divergence likely (between the Fed and other CBs), also speaking of robust employment and core inflation firming.  Fed President Harker (non-voter) said it is possible the Fed could hike at least three times in 2016. He said every meeting should be considered live, including the April FOMC.

Coming up

First up today is New Zealand food prices for March (8.45 AEST), something that might provide a little bit more colour ahead of NZ’s Q1 CPI due next Monday, 18 April. Then at 1030 is the AUD Westpac consumer sentiment index for April. In March, sentiment was at 99.1 (-2.2% m/m), virtually on its long term average.  Since that survey was taken, the weekly ANZ-Roy Morgan Measure has given back the gains it made in March, even though labour market news has been positive as has support for the AUD.

Of more market interest will be the Chinese trade report for March.  No time given on the screens; last time it was just after 1.30, so allowing for no daylight saving here now perhaps just after 12.30 with release of the USD version likely ~5 mins after the CNY version.  The big shock last time was the capitulation in export growth to -25.4% and that’s expected to reverse to +10% in March with imports down in USD terms by -10.1% after -13.8% in February.  Also keep an eye out for the March Chinese new yuan lending/ aggregate financing/money supply report that’s due any day now.

The big release is tonight’s US retail sales for March, coupled with the Fed’s Beige Book and the Bank of Canada rate decision, although given better Canadian data of late, no change is universally expected, the decision also coming with a press conference. The IMF is releasing its half yearly Fiscal Monitor tonight, not a big market mover at all, the news coverage a reminder of high government indebtedness. There are also two ECB speakers tonight, Nowotny and Constancio.

Overnight

On global stock markets, the S&P 500 was +1.00%. Bond markets saw US 10-years +4.72bp to 1.77%. On commodity markets, Brent crude oil +3.90% to $42.62, gold-0.0% to $1,258, iron ore +4.6% to $59.22. AUD is at 0.7683 and the range was 0.7584 to 0.769.

Good luck.

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• Markets Today: 16 April 2016 (PDF, 1MB)

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