After the strong EUR rebound late in New York, Asia initially saw risk
given an additional boost following a report China was considering
investing up to $1 tln of its reserves overseas (but note over a 5-10
year timeframe!). Nevertheless, this was enough to pull the risk
currencies higher with AUD a notable winner.
China GDP data for the second quarter came in better than expected at +9.5% y/y (though a slight slowdown from Q1’s 9.7%) but still not as bad as many feared given the PBOC’s spree of rate hikes since the start of the year. Industrial production and retail sales also beat forecasts with 15.1% and 17.7% annual growth respectively suggesting the fight against inflation was not hitting the broader economy too hard. This provided another prop for risk with Asian equity markets in the black for the first day in four.
With USDJPY languishing at its lowest levels since the March earthquake as US yields slid, we heard more jawboning from Japanese officials. Finance minister Noda commented that he was “closely watching markets” (usually zero impact) but added that JPY moves had been “one-sided” of late (more likely to jolt intervention hawks). Chief cabinet secretary Edano added that rapid JPY moves are “undesirable” and movements are being “closely watched”. USDJPY maintained a bid tone throughout the Asian session though many doubt that any intervention will happen at current levels since, compared to March, the Nikkei is higher, the BOJ is not really in easing mode (data getting better) and the USD slide is more broad-based.
Yesterday’s volatile session featured heavy pressure on the EUR with the single currency punished on the back of contagion fears in EU periphery debt. The early-Europe move came as another EU finance ministers’ meeting came and went without any concrete solutions to market concerns, and as a result EURUSD was pushed well below the 200-day moving average that had become a focal point. But in the latter stages the EUR attempted a comeback as news filtered through that Italy was planning austerity budget cuts and talk circulated of another EU meeting this Friday to thrash out a solution. Meanwhile the market was awash with rumours that the ECB planning bidding for EU periphery debt, possibly on behalf of China. A late downgrade to Ireland’s debt rating by Moody’s soured the rebound just a touch. Elsewhere, the Bank of England could garner some comfort from a real drop in inflation in June though a sharp increase in the trade deficit negated some of the positives.
The US also recorded a sharp increase in its trade deficit in May, rising above $50 bln and at its worst level since August 2008 while the minutes of the last FOMC meeting, well-previewed in Bernanke’s post-meeting press conference, saw members seeking to accumulate more information regarding the outlook for growth and inflation before deciding on the next policy move. QE3 was mentioned but not near implementation, subject to further data releases, notably in the jobs sector. Both these items combined to knock the dollar back from its 4-month high versus the index, assisting in the EUR’s rebound. Wall St saw its third straight day of losses with the EU financial woes and a weak start to the technology sector’s earnings season taking its toll.
For the rest of today, Europe can expect the release of Germany’s wholesale prices, Swiss producer prices, UK employment data and Euro-zone industrial production. The US session focuses on import prices and a speech from Fed’s Rosengren while his boss delivers the first installment of the semi-annual Humphrey Hawkins testimony.
Economic Data Highlights
China GDP data for the second quarter came in better than expected at +9.5% y/y (though a slight slowdown from Q1’s 9.7%) but still not as bad as many feared given the PBOC’s spree of rate hikes since the start of the year. Industrial production and retail sales also beat forecasts with 15.1% and 17.7% annual growth respectively suggesting the fight against inflation was not hitting the broader economy too hard. This provided another prop for risk with Asian equity markets in the black for the first day in four.
With USDJPY languishing at its lowest levels since the March earthquake as US yields slid, we heard more jawboning from Japanese officials. Finance minister Noda commented that he was “closely watching markets” (usually zero impact) but added that JPY moves had been “one-sided” of late (more likely to jolt intervention hawks). Chief cabinet secretary Edano added that rapid JPY moves are “undesirable” and movements are being “closely watched”. USDJPY maintained a bid tone throughout the Asian session though many doubt that any intervention will happen at current levels since, compared to March, the Nikkei is higher, the BOJ is not really in easing mode (data getting better) and the USD slide is more broad-based.
Yesterday’s volatile session featured heavy pressure on the EUR with the single currency punished on the back of contagion fears in EU periphery debt. The early-Europe move came as another EU finance ministers’ meeting came and went without any concrete solutions to market concerns, and as a result EURUSD was pushed well below the 200-day moving average that had become a focal point. But in the latter stages the EUR attempted a comeback as news filtered through that Italy was planning austerity budget cuts and talk circulated of another EU meeting this Friday to thrash out a solution. Meanwhile the market was awash with rumours that the ECB planning bidding for EU periphery debt, possibly on behalf of China. A late downgrade to Ireland’s debt rating by Moody’s soured the rebound just a touch. Elsewhere, the Bank of England could garner some comfort from a real drop in inflation in June though a sharp increase in the trade deficit negated some of the positives.
The US also recorded a sharp increase in its trade deficit in May, rising above $50 bln and at its worst level since August 2008 while the minutes of the last FOMC meeting, well-previewed in Bernanke’s post-meeting press conference, saw members seeking to accumulate more information regarding the outlook for growth and inflation before deciding on the next policy move. QE3 was mentioned but not near implementation, subject to further data releases, notably in the jobs sector. Both these items combined to knock the dollar back from its 4-month high versus the index, assisting in the EUR’s rebound. Wall St saw its third straight day of losses with the EU financial woes and a weak start to the technology sector’s earnings season taking its toll.
For the rest of today, Europe can expect the release of Germany’s wholesale prices, Swiss producer prices, UK employment data and Euro-zone industrial production. The US session focuses on import prices and a speech from Fed’s Rosengren while his boss delivers the first installment of the semi-annual Humphrey Hawkins testimony.
Economic Data Highlights
- US Jun. NFIB Small Business Optimism out at 90.8 vs. 91.2 expected and 90.9 prior
- US May Trade Balance out at -$50.2 bln vs. -$44.1 bln expected and revised -$43.6 bln prior
- US May JOLTs Job Openings out at 2974 vs. revised 2953 prior
- NZ Jun. Food Prices out at +1.4% m/m vs. +0.5% prior
- AU Jul. Westpac Consumer Confidence out at -8.3% m/m vs. -2.6% prior
- China Jun. Industrial Production out at +15.1% y/y vs. 13.1% expected and 13.3% prior
- China Jun. Retail Sales out at +17.7% y/y vs. 17.0% expected and 16.9% prior
- China Q2 GDP out at +9.5% y/y vs. 9.3% expected and 9.7% prior
- JP May Final Industrial Production out at +6.2% m/m, -5.5% y/y vs. 5.7%/-5.9% prior resp.
- JP May Final Capacity Utilization out at +12.8% y/y vs. -1.1% prior
(All Times GMT)
- GE Wholesale Prices (0600)
- Swiss PPI (0715)
- Norway Existing Homes (0800)
- UK Claimant Count Rate (0830)
- EU Euro-zone Industrial Production (0900)
- Us Mortgage Applications (1100)
- US Import Price Index (1230)
- US Fed’s Rosengren to speak (1310)
- US Fed Chairman Bernanke to testify (1400)
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