Another rollercoaster session for the EUR overnight as the market traded
from headline to headline with EURUSD eventually closing higher. Early
weakness came as a result of speculation about French bank BNP’s funding
but, once denied, saw a floor in place around 1.3550. German Chancellor
Merkel sought to quash talk of an imminent Greek default, assuring the
markets that Germany remained committed to financing Greece via the
Eurozone’s bailout funds. There was also some vague talk of BRIC
countries in discussions to buy European bonds and Italy confirming that
recent talks with China were about buying tangible assets rather than
bonds also helped sentiment. GBP underperformed as BOE’s Posen urged for
more money to be pumped into the economy. Data-wise, UK CPI was in line
with expectations (though still elevated at 4.5% y/y), the trade
deficit was wider than expected at -£8.9 bln and UK house prices are
still weak.
Wall St enjoyed a second day in the black as more-positive sentiment spilled over from Europe and investors went on a bargain-hunting spree – DJIA closed up 0.4%, S&P +0.91% and the Nasdaq +1.49%. US data was more or less in line with forecasts but a surprise rise in the IBD/TIPP economic optimism reading (39.9 from 35.8 and 38.0 forecast) gave an additional push to risk appetite.
Asia looked as if it would continue the positive tone at the open, with equities opening higher and currencies testing the upper limits of recent ranges. Even the first piece of Australian data suggested a positive slant for risk as Westpac’s consumer confidence indicator rose dramatically +8.1% m/m from -3.5% last time. This pushed AUDUSD back to 1.0370 but it was all downhill from there. The Australian Bureau of Statistics (ABS) announced downward revisions to earlier Q2 inflation data - notably the RBA’s preferred measures, the trimmed mean lowered to 0.7% q/q from 0.9% and the weighted mean lowered to 0.5% q/q from 0.9%. Meanwhile Australian dwelling starts continued to paint a gloomy picture for the housing market in Q2 with a 4.7% q/q drop following an upwardly-revised 3.3% increase in Q1.
China’s Wen says still standing by Europe, but they must do more to put houses in order
Subsequently we saw a mad scramble for US dollars across the board with short USD/Asia Ex-Japan positions trimmed back aggressively. The impact was also felt across the majors and most pairs were soon trading below opening levels. What was the trigger? Some suggest comments from Chinese Premier Wen were quite downbeat (though nothing new really – global uncertainty increasing, sovereign risk increasing etc) yet he did say that he thought it could all be overcome. Nevertheless, the damage had been done and most risk currencies were on the defensive.
The prospect of a Fed “Operation Twist” was raised by an FT article citing someone familiar with US Treasury thinking stating the Treasury would support any Fed stimulus to push long-term interest rates lower.
Today’s Asian session finishes with Japan’s industrial production/capacity utilization data while Swiss import prices start the European session along with UK unemployment data and Eurozone industrial production. We also have the possibility of headlines from a proposed conference call between Germany’s Merkel, France’s Sarkozy and Greek PM Papandreou. The North American session features Canada’s capacity utilization rate, US PPI, retail sales and business inventories.
Economic Data Highlights
Wall St enjoyed a second day in the black as more-positive sentiment spilled over from Europe and investors went on a bargain-hunting spree – DJIA closed up 0.4%, S&P +0.91% and the Nasdaq +1.49%. US data was more or less in line with forecasts but a surprise rise in the IBD/TIPP economic optimism reading (39.9 from 35.8 and 38.0 forecast) gave an additional push to risk appetite.
Asia looked as if it would continue the positive tone at the open, with equities opening higher and currencies testing the upper limits of recent ranges. Even the first piece of Australian data suggested a positive slant for risk as Westpac’s consumer confidence indicator rose dramatically +8.1% m/m from -3.5% last time. This pushed AUDUSD back to 1.0370 but it was all downhill from there. The Australian Bureau of Statistics (ABS) announced downward revisions to earlier Q2 inflation data - notably the RBA’s preferred measures, the trimmed mean lowered to 0.7% q/q from 0.9% and the weighted mean lowered to 0.5% q/q from 0.9%. Meanwhile Australian dwelling starts continued to paint a gloomy picture for the housing market in Q2 with a 4.7% q/q drop following an upwardly-revised 3.3% increase in Q1.
China’s Wen says still standing by Europe, but they must do more to put houses in order
Subsequently we saw a mad scramble for US dollars across the board with short USD/Asia Ex-Japan positions trimmed back aggressively. The impact was also felt across the majors and most pairs were soon trading below opening levels. What was the trigger? Some suggest comments from Chinese Premier Wen were quite downbeat (though nothing new really – global uncertainty increasing, sovereign risk increasing etc) yet he did say that he thought it could all be overcome. Nevertheless, the damage had been done and most risk currencies were on the defensive.
The prospect of a Fed “Operation Twist” was raised by an FT article citing someone familiar with US Treasury thinking stating the Treasury would support any Fed stimulus to push long-term interest rates lower.
Today’s Asian session finishes with Japan’s industrial production/capacity utilization data while Swiss import prices start the European session along with UK unemployment data and Eurozone industrial production. We also have the possibility of headlines from a proposed conference call between Germany’s Merkel, France’s Sarkozy and Greek PM Papandreou. The North American session features Canada’s capacity utilization rate, US PPI, retail sales and business inventories.
Economic Data Highlights
- US Aug. NFIB Small Business Optimism out at 88.1 vs. 88.0 expected and 89.9 prior
- US Aug. Import Price Index out at -0.4% m/m, +13.0% y/y vs. -0.8%/+12.5% expected and +0.3%/+13.8% prior resp.
- US Sep. IBD/TIPP Economic Optimism out at 39.9 vs. 38.0 expected and 35.8 prior
- US Aug. Monthly Budget out at -$134.2b vs. -$132.0b expected and -$90.5b prior
- AU Sep. Westpac Consumer Confidence out at +8.1% vs. -3.5% prior
- AU Q2 Dwelling Starts out at -4.7% q/q vs. +2.0% expected and revised +3.3% prior
- NZ Aug. Non-Resident Bond Holdings out at 62.5% vs. 60.1% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
(All Times GMT)
- JP Industrial Production (0430)
- JP Capacity Utilization (0430)
- JP Machine Tool Orders 0600)
- Swiss PPI (0715)
- UK Claimant Count Rate (0830)
- UK ILO Unemployment Rate (0830)
- EU Euro-zone Industrial Production (0900)
- US MBA Mortgage Applications (1100)
- CA Capacity Utilization Rate (1230)
- US PPI (1230)
- US Advance Retail Sales (1230)
- US Business Inventories (1400)
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