Central Banks Dominated Q1

We take a look at how various assets performed in Q1 and mull the big questions in the quarter ahead. The pound was the top performer Tuesday while the euro lagged. Asia-Pacific Q2 trading starts off with a band with the China PMI, Japanese Tankan and Australian building approvals on deck. Today's Premium Insights added a new trade on CADJPY.

Q1 was all about central bank surprises but the one that stands out most was the SNB removing the cap on the franc but looking at Q1 moves as a whole, CHF wasn't as strong as it might have appear. The Swiss franc was the top performer in the quarter but only gained about 2.25% against the dollar and 2.5% against the yen.

It was truly euro weakness that forced the SNB's hand as the market began to anticipate ECB quantitative easing. The euro fell 11.2% against the dollar in the quarter and was easily the worse performing major. The FX weakness led to some outsized gains in Italian and German stocks but much of the upside was erased in USD terms.

Adjusting for FX, the Shanghai composite was the top performer followed by the Nikkei. Those weren't two particularly strong economies but China may be benefiting from anticipation about further easing and continued momentum.

Another major story in the quarter was commodity weakness. WTI crude fell 10.6% in the quarter but base metals, wheat and some soft commodities also sank, along with iron ore. Gold started off the year with a nearly 10% rally but gave it all back to finish the quarter virtually flat.

The story so far this year has been interest rate surprises and central banks will likely stay in focus with the market now pricing a 74% chance of an RBA cut at the April 7 meeting.

Japan is beginning to see some better signs but it still very early and the tone could quickly change so data bears close watching. The quarter begins with the all-important Tankan survey at 2350 GMT. The large manufacturing index is expected to rise to 14 from 12.

At 0030 GMT, the focus shifts to Australian building approvals for February. The consensus is for a 4.0% m/m decline after a 7.9% surge in April. Every data point is big for the Aussie.

A half-hour later it's China in focus with the official manufacturing and non-manufacturing PMIs on schedule. The factory number is expected to slip to 49.7 from 49.9. Ashraf warns that the prevailing market reaction of each disappointment in Chinese figures has been USD-positive and that a soft reading could weigh on AUD.