RBA Governor Stevens said before Christmas we all had to ‘chill’ over the Christmas and new-year period and see what the data said thereafter. So far, the data has held up OK, but the latest employment data overnight has fallen to the soft side, the rate rising to 6.0% (from 5.8%) and full-time employment falling by the most since October 2013. The Aussie was initially weaker on the data, but found some buyers below the 0.7150 level, which is where it’s hanging now. For now, it’s a bit of a race between the Bank of Canada and RBA as to who may cut rates first, both of whom have been hit by weaker commodity prices in different ways. Elsewhere overnight, we’ve see the Fed minutes bring some volatility to the dollar, but no lasting impact. The Chinese inflation data was a touch weaker than expected at 1.8%, but this is the secondary story compared to the real economy and credit picture.
Distractions for today will include the latest ECB Minutes from their meeting last month. This was when the market geared themselves for further policy action from the ECB at the March meeting, but this came more from the press conference comments via Mario Draghi, so it seems unlikely that there will be any major bombshells in the minutes. Sterling will be watching further comments from the meeting of EU leaders as the final treaty changes are discussed ahead of the anticipated referendum later this year. The summit lasts for two days and it appears likely that any referendum date would be announced in parliament as early as next week. Sterling, as we’ve said before, remains vulnerable, given the uncertainty created by the referendum and the large levels of overseas holdings of UK assets.