Daily Market Outlook, April 27, 2022

Overnight Headlines

Asian equity market performance is mixed this morning. Many markets are down seemingly reflecting concerns about the news that Russia has cut off gas flows to Bulgaria and Poland, which has fanned fears of a wider halt of supplies to Europe. However, Chinese indices are up following President Xi’s call for “all out” efforts to boost infrastructure constriction. In Australia, Q1 annual CPI inflation rose by a higher-than expected 5.1% (from 3.5% in Q4). The Japanese government announced a package of measures to combat rising inflation.

Today’s economics calendar is light. The CBI retail survey will provide one of the first gauges of April sales. Last week’s official data for March saw retail sales decline for the third time in four months. Some of that weakness may represent households spending more on consumer services, which are not included in the retail sales measure, as Covid restrictions end. However, there are concerns that the drop also represents the impact of rising inflation eating into consumers’ spending power and a further share decline in GfK measure of consumer confidence for April will have done nothing to ease those fears. Consequently, the CBI report will be watched for more signs of weakness in April.

In the US, pending home sales for March will provide further indications of whether concerns about higher interest rates are already starting to impact on the housing markets Pending sales as of February had fallen four consecutive months and were more than 5% lower than a year ago. That may exaggerate the extent to which sales weakened and so today’s data may surprise on the upside. However, there seems no doubt that a sector that is particularly interest rate sensitive should be one of the first to be impacted.

Early tomorrow, the Bank of Japan will give its latest monetary policy update. It is not expected to make any immediate policy changes. However, of particular interest will be whether it has anything new to say about this year’s sharp slide in the Japanese yen. There has been speculation in markets that the BoJ may tweak its ‘forward guidance’ to signal a higher probability that interest rates may be raised in the not-too-distant future. In the Eurozone, European Central Bank head Lagarde is set to speak but her remarks may not touch on monetary policy.

USDJPY - 129.50 440m. 129.00/10 670m. 127.50/70 1.00bn (603m C). 127.00/10 650m. 126.70 540m.
EURUSD - 1.0900/10 1.75bn (1.54bn P). 1.0800 1.45bn (1.19bn P). 1.0750/60 618m. 1.0700/10 1.16bn (1.11bn P). 1.0650 409m. 1.0600 1.41bn (P). 1.0500 769m.
GBPUSD - 1.3000 1.19bn (P). 1.2900 1.10bn (P).
AUDUSD - 0.7450 1.86bn (C). 0.7360/70 724m. 0.7340/50 470m. 0.7130/50 688m. 0.7090/0.7100 447m.
NZDUSD - 0.6830 1.83bn (1.50bn P). 0.6730 1.38bn (1.10bn P).
USDCAD - 1.2470/80 566m.
USDCHF - 0.8550 600m. 0.9300/10 1.32bn (1.14bn P).
USDMXN - 20.10 745m.
USDCNH - 6.65 400m. 6.50 700m.