Foreign exchange frenzies
- There is not that much data to distract markets, which raises the real risk of markets reacting to markets reacting to markets. Leading the list of likely catalysts is, of course, the movement of the US dollar in foreign exchange markets.
- Dollar strength creates lower dollar commodity prices, which may bolster consumer confidence (less important) and consumer spending (more important) in the US. The impact on non-commodity export volumes from the US, or import volumes to the US, is minimal, leaving dollar strength a net positive.
- Chinese industrial production was a little weaker than hoped, allowing for the distortions of the lunar new year. Retail sales (also holiday affected) were quite strong, and as the Chinese authorities start to emphasise consumer led growth this is a figure that may require more attention.
- Japan's corporate goods price inflation (PPI under a pseudonym) was uninspiring at 0.5% yoy. The US quarterly services survey is out today - one of those numbers that excites economists but not markets. As ever, economists are in the right, as it has the potential to revise GDP and through that influence policy.