Scoreboard: Dollar dazzler

Strong retail sales data and positive global momentum pushed the Australian dollar above US90c, while the US and Europe showed signs of strength.

Equities pushed modestly higher overnight, rates sold off and commodities received a gentle bid. It was in the forex market that we saw a flurry of activity following a run of more hawkish news and data around the globe. We already know the Australian story and the Australian dollar sits just below 91 US cents as a result.  Then in Europe, the ECB appeared to be more relaxed on the outlook, while in the US, jobless claims weakened -- a good omen coming into tonight’s payrolls figure. Specifically, new claims fell 26,000 in the week to February 28, which brings the total number of claims back down to 323,000. Claims around this figure seem to be a reversion point once distortions run out. That being the case, the signal is that we can expect further strong payrolls results.

Global equities pushed modestly higher. The S&P500 is 0.3 per cent higher at 1878, the Dow had put on 78 points to be at 16437, and the Nasdaq was 0.1 per cent lower (4352). Over in Europe, the Dax was flat, the Cac rose 0.6 per cent and the FTSE100 was up 0.2 per cent.

Forex : The Australian dollar surged after yesterday’s stronger retail  sales figures and when traders in Europe and the US woke up to the better-than-expected data, they carried it higher still. As I write, the unit is at 0.9097, having hit a high of 0.9111. That almost a big figure higher than yesterday at 1630 (AEST).  Its not just as Aussie dollar story, though -- the euro shot higher as well and in fact it outperformed the little battler, rising 130 pips to 1.3861.

The ECB was the driving force here. In their meeting last night, the Bank left rates unchanged, but the accompanying commentary was viewed as more hawkish.  Mario Draghi, the Bank’s head, said that Europe was an island of stability, and Bank upgraded their growth outlook to boot. While Draghi went on to note that rates would remain very low even as the economy recovered, traders seem to have pared their expectations for further rate cuts. The British pound rose but underperformed as it was only 30 pips higher at 1.6744, while the yen is at 103.02.

Commodities were generally stronger, though moves weren’t significant. WTI rose nearly 0.2 per cent to $101.6, and Brent was up 0.4% ($108.13).  Moves elsewhere saw gold up $11 to $1351, silver was 1.3 per cent higher and copper was up 0.3 per cent.

Rates sold off a little. The US 10-year yield rose only about 3 basis points though to 2.73 per cent.  The 5-year yield is then at 1.57 per cent and the 2-year at 0.35 per cent.  Aussie futures sold off -- the 10s lost 4½ ticks and sit at 95.10, and 3s were 2 ticks lower to 97.010.

Elsewhere, the most interesting data included statistics that shows US households added nearly $3 trillion to their net worth position in the fourth quarter of 2013 (up nearly 4 per cent) to an eye popping $80 trillion. Net worth is at a record level in real terms. Otherwise, US factory orders fell 0.7 per cent in January after a 2 per cent fall the month prior.  In the central banking space there was quite a bit going on. Like the ECB, the Bank of England met but didn’t change rates or pump up the printing presses. Then over in the US, the Philadelphia Fed present said the Fed should follow the steps of the Bank of England and drop its numerical forward guidance. He noted that the 6.5 per cent unemployment target had pretty much been met with the current unemployment rate at 6.6 per cent, and it was no longer helpful.

In markets today, the SPI suggests our stocks will come off a little today -- up 0.2 per cent. In terms of the news and data flow, for Australia, the Reserve Bank Governor’s testimony to the House of Representatives economics committee kicks off at 930. I doubt the Governor will deviate too much from past communications; rates are on hold and recent data more than confirms that stance. The key release otherwise will be US payrolls tonight. The market expectation is that 150,000 jobs were created in February, with the unemployment rate expected to remain at 6.6 per cent. German industrial production is also worth a watch as well.

Have a great day.

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