While equities are enjoying some modest gains, major FX pairs have been mostly sidelined throughout Asian trade. An exception has been the AUD which is being bid higher heading into tomorrow’s CPI data. AUD/USD bounced off 0.932 and touched 0.936 today. There was no significant data today, but tomorrow’s CPI print has been tipped as a key reading for the AUD given the implications it could have on the RBA. CPI is expected to show a 0.8% q/q rise, which translates to a 3.2% y/y rise. However, the figure the RBA actually looks at is the trimmed mean which is expected to come in at 2.9%. The previous reading was 2.6% and therefore if this materialises, it could be interesting to see how this feeds through to the RBA given 3% is the top-end of its target range. In fact some analysts feel this would confirm the feeling that the most likely move in rates will be higher as opposed to lower.

China looking to arrest PMI slide

Additionally we have China’s HSBC flash manufacturing PMI reading due out at 11.45 AEST. Following the recent 19% drop in aggregate financing and other money supply data, we wouldn’t be surprised to see manufacturing remain benign. The market is looking for a slight improvement to 48.4 from 48.1. This figure has been sliding since October and another disappointing reading would likely put further pressure on Chinese officials and result in further talk of stimulus. While there will be plenty of focus on the AUD, there will also be some attention on the NZD as the market expects the RBNZ to hike rates yet again.

Europe pointing higher

Looking ahead to European trade, the major bourses are pointing higher. The single currency has been sidelined in Asia, trading just shy of 1.38 against the greenback. This week we have several PMI readings due out of the region, along with a speech by ECB President Mario Draghi on Thursday. Should we continue to see data for the region deteriorate, then pressure will remain on Draghi to take action. As a result, sentiment is likely to remain bearish on the single currency heading into the speech. Following the key releases this week, there is risk of a squeeze higher should the data be in-line or positive and if Draghi doesn’t say anything definitive on taking action.

Big reports due out this week

Around 160 S&P 500 names report this week along with a number of tech giants like Apple, Facebook and Netflix. While earnings have been positive so far, it is important to note the scepticism that dominated trade heading into earnings season. This has made any beats well received, with investors happy to push stocks higher as opposed to taking profits. It’s also interesting to note that perhaps the run in improving US economic data has translated to positive corporate earnings. Housing data will be in focus in the US this week with existing home sales due out later today and new home sales tomorrow.

By Expert Panel | 22.04.2014
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