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Japanese Investors are Bullish on Japan

Ever since Prime Minister Abe's plans for economic and financial reform - 'Abenomics'- were put in place, there has been increased optimism towards financial assets. Monetary and fiscal stimulus have supported rallies in the Nikkei and USD-JPY since November 2012 of 125% and 50%, respectively. The sense of optimism is different this time. This is more than financial assets being supported by quantitative easing. Standard Chartered (SC) research notes that there is a strong belief among local investors that things are changing in corporate Japan. Corporates are drawing down cash from their balance sheets and using it to fund overseas M&A. There is also an increased focus by corporate leaders on improving return on equity (ROE). If the objective of Abenomics is to change the mindset of consumers and corporates, it seems that the corporates are listening and ready to act. If local investor optimism was focused on USD-JPY in December, investors are currently focusing all of their domestic interests on local equities. The shift in investor positioning is reflected in the change in correlation between USD-JPY and the Nikkei. As recently as February, the 30-day rolling correlation between the two markets was as high as 0.60, but has fallen to marginally negative levels. In addition to increased optimism about corporate behaviour, there is increased confidence in corporate profitability. SC adds that investors highlighted improvements in earnings as well as profit margins.

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Usd/myr Uptrend Intact Above 3.70, Could Test at 3.7280 Ytd High

Higher DXY, fiscal woes, foreign outflows underpin 1 month traded 3.7255-3.7300 range overnight, closed 3.7245-85 in NY

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Gbp Focus Remains on the Election

In a similar vein to last week where the final reading of UK Q4 GDP was unexpectedly revised higher, UK activity data this week should be consistent with robust economic activity. However, continued political uncertainty is likely to keep downward pressure on GBP. Barclays says they and consensus forecast the services PMI (Tuesday) to increase slightly to 57.0 in March from 56.7 in February while industrial and manufacturing output (Friday) should both increase 0.4% m/m in February (consensus: 0.3% and 0.4%, respectively). The Bank of England rate decision (Thursday) is widely expected to result in no change of policy and therefore no statement will be issued. Indeed, central bank guidance is likely to be lacking over the next five weeks. With the dissolution of parliament on 30 March, the BoE is now bound by "purdah" rules which prevent central bank communication until the final election results are known. The 7 May general election remains the least predictable in a generation and growing political risk premium ahead of the event is likely to support high levels of GBP volatility and weigh on GBP. "we forecast further GBP/USD depreciation to 1.42 in Q2 2015 and modest EURGBP appreciation towards 0.74 over the next one to two months as political risk premium increases", Said Barclays in a report on Monday

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Europe Manufacturing Activity on a Slow Pace

Markets will focus their attention this week on Greece. A late payment of the IMF loan repayment of €460m on 9 April cannot be ruled out. Greece sent a list of reforms last week in the hope that it will allow the (partial) disbursement of the €7.2bn instalment under the remaining troika tranche. However, it is not sure that there is sufficient agreement for the Eurogroup to meet and decide before the next scheduled meeting (24 April). On the data front, the final estimate of the PMI should slightly disappoint from the flash, yet remaining at levels consistent with solid GDP growth in H1 15. German industrial output and export figures should point to a slow pace of recovery in the manufacturing sector in February although factory orders might suggest some improvement. French Industrial output for February and BoF business sentiment for March should also support the slightly firmer picture of the French economy. "we expect the Swiss headline inflation rate to rise slightly to -0.7% yoy in March, driven by higher oil prices over the past two months", Says Societe Generale.

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Rbi Maintains Status Quo on Policy Rates, Further Rate Cuts are Still Likely

It did not come as a surprise that the Reserve Bank of India (RBI) maintained status quo on rates in its policy meeting today. The repo rate was kept on hold at 7.50%. This does not indicate an end to monetary policy easing, however; the RBI emphasised in its policy statement that its stance remains accommodative. Also, while the RBI has made the amount and timing of further rate cuts contingent upon four pre-conditions the governor said that "some progress" on these could trigger rate action. The RBI will watch for developments on (1) The transmission of a 50bps reduction YTD in the repo rate, (2) CPI inflation prints, especially after the recent unseasonal rainfall, (3) policy efforts to unclog supply bottlenecks and reduce the pipeline of stalled projects, and (4) the impact of the US Fed's expected interest rate normalisation on financial markets. Standard Chartered says they expect another 50bps reduction in the repo rate to 7.0% in FY16, equally split between the June and August policy meetings. The RBI will, by then, have fresh information on most of its pre-conditions, especially on transmission channels and the impact of weather on the CPI inflation trajectory. Remaining fairly confident that the first 25bps of policy rate reduction will occur by June, the subsequent 25bps reduction may be delayed if the RBI becomes concerned about the impact of the first Fed rate hike. "We see a risk that the last 25bps reduction may not occur if the RBI decides to keep real policy rates at the mid-point of its desired 150-200bps range, instead of at the lower end as we currently assume. We expect CPI inflation to average 5.4% y/y in FY16", Said Standard Chartered in a report on Wednesday

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Japan's February Mor Likely Shrank

Japan will release February machinery orders (MoR) and March PPI inflation on 13 April. The MoR is expected to have declined by 2.0% m/m in February after dropping 1.7% m/m in January. "Exports and industrial production contracted m/m in February partly due to sluggish external demand; we think the MoR will follow a similar trend as it is an indicator of business capex. PPI inflation likely continued slowing in March, to 0.4% y/y from 0.5% y/y in February", says Standard Chartered Excluding the sales tax effect, PPI inflation likely dropped by 2.5ppt y/y in March. Prices in the energy sector contracted significantly in the first two months of 2015. The trend is likely to continue in March and put downward pressure on domestic PPI inflation.

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Rbi Continues to Display a Clear Dovish Bias

The Reserve Bank of India (RBI) kept its key policy interest rates unchanged earlier this week, but continues to display a clear dovish bias, as indicated by its comment, that "going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data." The RBI also appears confident in achieving its retail (CPI) inflation target of 6% by early 2016. The bank highlighted that potential upside risks to inflation (ie, weather aberrations, administered price hikes, geo-political factors) are counter-balanced by global deflationary/disinflationary trends, the still soft outlook for global commodity prices and the slack in the domestic economy. "We continue to forecast a 25bp cut in the repo rate in June. We would also not rule out the risk of further easing, but this will depend on greater clarity on 2016 inflation and the impact of a potential Fed rate hike in H2 2015." - Barclays Capital said in a report on Friday

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Swedish Inflation Data in Focus

Swedish inflation (Tuesday) is likely to dominate the agenda for the SEK in the coming week. In line with the projections and recent Riksbank rhetoric, market participants are looking for a further bounce in CPIF inflation to 0.3% m/m (1.1% y/y) from 0.8% m/m (0.9% y/y). Indeed, inflation has recently been surprising to the upside, with Riksbank officials acknowledging that currently easy monetary policy is having an effect. A further increase in inflation is likely to support the SEK against other European currencies such as the EUR and the NOK. "we remain cautious about a sustained SEK rally at this juncture given the Riksbank's recent emphasis on a strong SEK posing downside risks to the inflation outlook. Further ahead, we remain constructive on the SEK owing to positive fundamentals, an improved economic outlook and our expectations for further stabilization in inflation", Says Barclays

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Us Consumers Likely returned to Shops in March

After dismal private consumption in January and February, partly due to the harsh weather, a rebound is likely in March: retail sales likely to be seen up 0.9% m/m (consensus: 1.0%), boosted by solid car sales, after -0.6% in February. Standard Chartered notes: We see core sales ex autos and gas up 0.4% from -0.2% in February. This should fuel hopes that GDP will rebound in Q2 after hitting a speed bump in Q1. We see the gas-pump savings starting to boost US consumption gradually, many consumers having opted to pay down debt rather than spend on other items so far. We see growth of 1.0% q/q SAAR in Q1, accelerating to 3.0% in Q2.

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Us Consumers Likely returned to Shops in March

After dismal private consumption in January and February, partly due to the harsh weather, a rebound is likely in March: retail sales likely to be seen up 0.9% m/m (consensus: 1.0%), boosted by solid car sales, after -0.6% in February. Standard Chartered notes: We see core sales ex autos and gas up 0.4% from -0.2% in February. This should fuel hopes that GDP will rebound in Q2 after hitting a speed bump in Q1. We see the gas-pump savings starting to boost US consumption gradually, many consumers having opted to pay down debt rather than spend on other items so far. We see growth of 1.0% q/q SAAR in Q1, accelerating to 3.0% in Q2.

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Bank of Canada may Stay Put at Its April Meeting

The Bank of Canada releases its policy decision at 10:00 ET on Wednesday, alongside its quarterly monetary policy report. "We think the overnight lending rate will be kept at 0.75%, as all analysts polled by Bloomberg also forecast. We do not entirely dismiss a rate cut - the memory of the 'surprise' January rate cut remains vivid", Says Standard Chartered Governor Poloz is not afraid of surprise moves - but the probability is relatively low. The tone as being dovish, and expect Governor Poloz to emphasise that the BoC remains open to cutting rates further later, depending on the data. A likely modest cut to the 2015 growth forecast (currently 2.1%) should add to the dovish slant.

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Poland Will Probably Exit Deflation This Year[/B]

Although a stronger PLN may extend the period of deflation, a turning point has been reached in the deflationary cycle that began in August 2014. The CPI bottomed out in February, and after increasing in March, and it will likely gradually increase in the forthcoming months, turning positive again by the end of Q4 15. The central bank expects deflation to come in at -0.5% yoy at the end of 2015. The Ministry of Finance expects the country to exit deflation sooner than the central bank is forecasting. It is possible, however, that a stronger PLN and volatile oil prices create uncertainty around the ministry's expectation. "In its recent World Economic Outlook, the International Monetary Fund forecast Poland's CPI to accelerate to 0.4% yoy at the end of this year. In our opinion, it will instead be in the range of 0.1-0.3%", said Societe Generale in a report on Thursday

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Canada: Cpi and Retail Sales Two Top Tier Data Releases Tonight[/B]

Tonight we get two top tier data releases in Canada: CPI and retail sales. A still-firm, but on-consensus CPI report is expected (RBC: core 2.1%y/y, cons: 2.1%), and considering the BoC seems to be more focused on activity indicators at the moment, that means the retail sales figure is more relevant and likely to get an FX reaction. The expectations are decently above consensus for retail sales (RBC: ex-auto 1.3%m/m, cons: 0.7%). That implies a CAD positive reaction, but that may only be a small influence compared to the direction of oil prices which have been the most important driver for CAD this week. RBC Capital Market Says "Our technical strategy team highlights 60.99 and 63.50 as the key levels above for WTI now that the long-held range has broken. For USD/CAD, they point out 1.2114 and 1.2066 as the key levels below, and see resistance located at 1.2253 and 1.2326"

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Treasuries Recover From Early Weakness Amid Sell-Off On Wall Street

After moving modestly lower in early trading Friday, treasuries showed a notable turnaround over the course of the trading day. Bond prices climbed well off their early lows to end the day firmly in positive territory. Subsequently, the yield on the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 1.85 percent. With the drop on the day, the ten-year yield extended a recent downward trend, ending the session at its lowest closing level in well over two months. The rebound by treasuries was partly due to a sell-off on Wall Street, with the Dow tumbling by more than 300 points at its worst levels. Concerns about developments overseas contributed to the pullback by stocks, leading some traders to move their money into the relatively safe haven of bonds. The early weakness among treasuries came following the release of the Labor Department's report on consumer price inflation in the month of March. The Labor Department said its consumer price index edged up by 0.2 percent in March, matching the increase seen in February. Economists had expected the index to rise by 0.3 percent. Core consumer prices, which exclude food and energy prices, rose by 0.2 percent for the third consecutive month. The uptick in core prices matched economist estimates. While the headline index was down by 0.1 percent compared to a year-ago, the annual rate of core price growth ticked up to 1.8 percent in March from 1.7 percent in February. The core price growth is more closely watched by the Federal Reserve. Rob Carnell, chief international economist at ING, said, "Given recent activity data weakness, which has seemed to all but rule out a June rate hike, this data adds an additional, but unhelpfully contradictory inflation element to the rate hike timing debate." "That said, it will need corroboration by activity data soon if it is not to be too late for a June hike, and that point of no return may have already been passed," he added. Following the slew of economic data released over the past week, the economic calendar for next week is relatively quiet. Nonetheless, traders are likely to keep an eye on reports on weekly jobless claims, durable goods orders, and new and existing home sales.

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Japan Tertiary Industry Index +0.3% In February

An index measuring tertiary industry activity in Japan was up a seasonally adjusted 0.3 percent on month in February, the Ministry of Economy, Trade and Industry said on Monday, standing at 100.5. That topped forecasts for a decline of 0.7 percent following the 1.4 percent gain in January. Among the industries moving higher were real estate, transport and postal activities, finance and learning support. Industries moving lower included retail, medical, utilities, personal services and compound services.

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Singapore Inflation Likely decreased Further in March

Singapore releases March inflation numbers on 23 April. On a seasonally adjusted m/m basis, inflation likely decreased to -0.1%. Singapore's current path of disinflation is temporary. Housing inflation likely continued to drag down headline inflation, as decreases in housing prices weighed on the rental market. Private road transport inflation was also likely dragged down by a sharper correction in ownership premiums on motor vehicles. In contrast, petrol duties implemented in February likely continued to support core inflation. A deflationary pressures is seen dissipating as the year progresses. "We expect inflation to have declined further to -0.5% y/y, versus the higher -0.3% recorded in February", says Standard Chartered.

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Germany Ifo Business Climate Likely continued to Improve

The index has been on a clear uptrend since its trough in October 2014. The combination of a lower oil price, and European Central Bank easing policies that led to euro (EUR) depreciation and lower borrowing rates is helping German businesses. Exporters are likely to be particularly positively affected by EUR depreciation. In the last survey, manufacturers, wholesalers and retailers all showed an improved outlook. The construction-sector outlook deteriorated, but remains strong. Germany is expected to maintain this positive momentum in Q2, unless geopolitical events raise uncertainty or the situation in Greece becomes more dramatic. "We expect the German IFO business climate index to have increased to 108.7 in April from 107.9 in March, an eight-month high", said Standard Chartered in a report on Thursday.

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Japan Producer Prices Rise 3.2% In March

An index measuring producer prices in Japan were up 3.2 percent on year in March, the Bank of Japan said on Friday - standing at 103.0. That was just shy of forecasts for 3.3 percent, which would have been unchanged from the February reading. Among the individual components, prices were down for hotels, real estate, communications and transportation. For the first quarter of 2015, producer prices were up 3.3 percent on year, slowing from 3.5 percent in the previous three months. They were also down 0.1 percent on quarter after adding 0.2 percent in the three months prior.

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Americas Roundup: Cad Rapidly Depreciating Vs. Usd on Friday, Poloz Speech Weighs - 27 April, 2015

Market Roundup United States Durable Goods Mar 4%, forecast 0.6%, previous -1.4% United States Non-def Ex-Air Mar -0.5%, forecast 0.3%, previous -2.2%, def spending skews headline number Mexico Retail Sales YY Feb 5.6%, forecast 4.2%, previous 4.7%, rates on hold unless inflation rises United States Mar building permits revised number mm increase to 1.042 mln vs previous 1.039 mln United States Mar building permits revised chg mm increase to -5.4 % vs previous -5.7 % Argentina Feb economic activity yy increase to +1.4 % (forecast 0.5 %) vs previous 0.0 % Argentina Mar industrial output nsa increase to -1.6 % (forecast -1.5 %) vs previous -2.2 % Colombia's central bank holds key lending rate at 4.5 pct, as expected Greece's Varoufakis agreement with lenders will be difficult but will happen, there is no other choice; Greece needs a deal & is ready to compromise Germany'S Merkel says we will do everything to ensure that Greece stays in the Euro zone European governments have largely failed to reform (EU document) Bank of Canada's Poloz Oil price shock soon to be positive overall for Canada Reuters Poll Brazil's CB to hike rates 50bps next week to 13.25% (42/48 economists) Economic Data Ahead No Significant Data Key Events Ahead Sat Apr 25 (1130 ET/ 1530 GMT) German Bundesbank Pres Weidmann & German FinMin Schaeuble to participate in a press conference FX Recap USD/CAD: Canadian dollar is now rapidly depreciating vs. its American counterpart on Friday, lifting USD/CAD to session highs near 1.2180. Canadian dollar shed further ground following Poloz speech. USD dynamics and the crude oil performance will remain the main drivers for the CAD into the next week. GDP figures for the month of February, due on Thursday will also be watched. Currently the pair is up 0.21% at 1.2170. Immediate resistance is at 1.2208 (low Apr 22) followed by 1.2250 (high Apr 23) and then 1.2328 (high Apr 16). Supports on the downside are at 1.2135 (low Apr 23), 1.2100 (psychological level) and finally 1.2088 (low Apr 17). Option expiries Monday 27th: 1.20 (700M),1.2035-50 (700M), 1.2165 (804M), 1.22 (807M) USD/JPY: Greenback is losing face in to the closing hours of the week's session. USD/JPY bears in charge ahead of BoJ next week. The pair has lost the 119 handle in a bearish market, and is currently trading at the day's low of 118.84 after having made a high of 119.67. Supports is seen at 118.30 (March 26 low), while resistances are at 120.14 and 120.44. Option expiries Monday 27th: 119.00 (738M), 120.00 (1.8BLN) EUR/USD: Renewed optimism regarding a potential EU-Greece deal pre-Eurogroup meeting gave extra legs to the pair. Markets shrugged off poor results from the preliminary manufacturing and services PMIs as well as mixed IFO numbers. Lack of progress in the Eurogroup meeting prevented EUR-bulls to advance beyond the key barrier at 1.0900. Euro is above 1.0800 vs USD, on track to close the second consecutive week with gains. Another test of the 1.0900 handle and the critical resistance band at 1.1040/60 in the pipeline in the upcoming sessions. Option expiries Monday 27th: 1.0800 (521M), 1.0900 (1.1BLN) EUR/GBP is consolidating lower after the cross was punished from above the 0.72 handle. EUR/GBP rally ran in to strong offers just shy of the 0.7200 round figure at the cloud base at 0.7194. The pair is currently trading at 0.7160 with a high of 0.7212 and low of 0.7147. 0.7015 (March low) and 0.7000 (psychological level) are key supports.

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Uk Consumption to Drive Growth, Investment Under Pressur

UK GDP is expected to have expanded 0.7% q/q (2.8% y/y) in Q1, slightly higher than the 0.6% q/q rise in Q4-2014. Household consumption likely remained the key contributor to GDP growth, as it has been since the beginning of the UK recovery. Net trade is also likely to have made a marginally positive contribution, leading to a smaller trade deficit. Business investment may have remained under pressure due to election uncertainty; it fell 0.9% q/q in Q4. Whether we see a rebound in investment in Q2 will depend on how quickly the uncertainty fades after the election. Regarding GDP's sectoral breakdown, the average services PMI for Q1 was higher than in Q4-2014, a signal that the recovery remains very much driven by the services sector. Industrial production is more subdued recently, especially the oil-extraction sector.

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Euro Area Consumer Confidence Likely dipped in April

The final euro-area consumer confidence index is expected to match the flash release of -4.6 in April, dropping from -3.7 prior, which was the highest reading since 2007. The main reasons for higher consumer confidence are lower energy prices and easier credit conditions for households, which support real disposable household income. Wages and salaries increased 1.1% y/y in Q4-2014 in the euro area, about 1% higher than inflation, supporting real incomes. There are also some signs that the labour market is improving. However, this is not the case for all euro-area countries. Labour markets in Germany and Spain are among the best performing, while they remain stagnant in France and Italy.

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New Zealand Has NZ$631 Million Trade Surplus

New Zealand had a merchandise trade surplus of NZ$631 million in March, Statistics New Zealand said on Wednesday. That topped forecasts for a surplus of NZ$300 million following the NZ$50 million surplus in February. Exports were down 2.0 percent on year to NZ$4.9 billion, while imports climbed an annual 4.1 percent to NZ$4.3 billion. Year to date, New Zealand has a trade deficit of NZ$2.407 billion versus forecasts for NZ$2.700 billion after coming in at NZ$2.181 billion in February.

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New Zealand Building Permits Climb 11% In March

The total number of building permits issued in New Zealand advanced a seasonally adjusted 11.0 percent on month in March, Statistics New Zealand said on Thursday - standing at 2,271, a nine-year high. That topped forecasts for an increase of 2.0 percent following the 6.3 percent contraction in February. "Townhouses, units, and retirement villages have driven the increase in new dwelling consents over the past year," business indicators manager Neil Kelly said. On a yearly basis, the total number of permits issued spiked 14.0 percent. The value of permits issued in March climbed NZ$128 million or 10 percent to NZ$1.4 billion. Individually, residential work was up NZ$125 million or 16 percent to NZ$925 million, while non-residential work added NZ$3 million or 0.7 percent to NZ$427 million. By region, there were 756 permits issued in Auckland (of which 449 were houses). Canterbury had 588 permits (of which 460 were houses) and Waikato had 219 (of which 186 were houses).

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Australia Inflation Expected To Slow - TD Securities

Consumer prices in Australia are expected to have decelerated in April, the latest survey from TD Securities and the Melbourne Institute showed on Monday. Inflation is forecast to have slowed to 0.3 percent on month after it was called at 0.4 percent in March. On a yearly basis, consumer prices are tipped to slow to 1.4 percent from 1.5 percent in the previous month. The data further fuels speculation that the Reserve Bank of Australia may act to cut interest rates in the near term.

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Australia Performance Of Service Index Contracts In April - AiG

The service sector in Australia swung to contraction in April, the latest survey from the Australian Industry Group showed on Tuesday, with a Performance of Service Index score of 49.7. That's down from 50.2 in March, and it slips below the boom-or-bust line of 50 that separates expansion from contraction. Among the individual components of the survey, new orders, services sales, supplier deliveries and services businesses all contracted in April, while services employment expanded.

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