• FX market recap and this week’s fundamental focuses
• Japan bank lending rises again as services sector gets pressured from pandemic
• Canada’s housing price surge and may lead to vulnerabilities
Last week was the first trading week of April and we saw market sentiment continued to be on the rise to favor risks. In the equity market, major indices in the US gained considerably and tech stocks led the rise. In Europe, equities were also in the spotlight, especially in the UK, where major indices outperformed its regional counterparts such as the US and APAC. Investors were able to get some relief from the bond yields, and re-assurance from the Fed has also cooled down bets on interest rate hikes. As a result of these, the FX market saw USD underperforming against its peers, as EUR, JPY and CHF capitalized on the falling yields. Gold prices also nudged slightly higher.
For this week ahead, we will see earnings season to start rolling in, as well as the release on local CPI and retail sales, which are all key metrics to watch. NZD investors will be waiting for RBNZ on the rate decision, and China will also report its first quarter GDP. Fed Chair Jerome will have a moderated Q&A session on Wednesday, during which he is expected to reiterate the dovish stance.
In Japan, Monday’s data release shows that bank lending rose 6.4% in March on a YoY basis. This is because services industry has been relying on help from banks to ease their businesses during COVID, including restaurants and hotels. Outstanding loans have reached a record high to about 580 trillion yen. Deposits held by banks were also on the rise, up 9.9% in March, indicating that households keep saving money as opposed to spending it.
In Canada, housing prices are surging. According to the data released on Friday, outstanding household debt has risen by 3.5% and average selling price on homes have jumped 25% in February. Household indebtedness has worsened according to the price surge. We have seen a similar picture in New Zealand earlier, where people were taking advantage of the cheap mortgages to buy houses and thus pushing the prices to record highs. As a result, the government has intervened in the housing market, an action that has cooled down the demand on its local currency as well. Whether or not the same story will happen in Canada is still to be monitored.