The NOK was all over the place today and sterling perked up a bit against the euro, but it was a slow day today in FX land as the market awaits the rigours of the end of summer.
There was little action today after yesterday saw EUR/USD and GBP/USD finding emphatic support at key levels, suggesting that the market is avoiding making any strong statements for the moment and staying within the range. The bond market decided to react as the ancient history called the Q2 GDP was revised a bit higher. This saw JPY crosses catching a bit of bid. Elsewhere, USD/CAD is mulling whether it should break to new lows ahead of this Friday’s Fed conference at Jackson Hole, Wyoming.
Scandies in focus
Yesterday and at least earlier today, we’ve had a very weak pair of Scandies, as SEK was hit by a very ugly trade balance number yesterday (and uninspiring data today) while NOK retreated yesterday and earlier today ahead of the Norges Bank deposit rate setting meeting today. A majority were looking for no change to the Deposit Rate today, which indeed was left at 1.50%, but it appears a minority were looking for more dovish rhetoric from the bank or at least a prominent mention of the NOK’s recent strength after EUR/NOK has recently declined to its lowest level in almost 10 years.
The immediate reaction to today’s announcement saw a sharp appreciation in the NOK as the bank said that it saw the rate staying at the current level through the end of the year and made prominent mention of debt and house price levels and said that domestic economic strength could mean faster inflation ahead, though the strong NOK was mentioned as a factor in keeping short-term inflation muted.
NOK may have reason to strengthen in the shortest term on this news, but I suspect things like the oil price and direction of risk appetite and the euro will quickly matter far more in the days ahead. On that note, when the EUR/USD tops out, USD/NOK might move quickly to the upside – a break back above 5.90 is needed to reverse the situation there.
Looking ahead
Later today, we’ve got the latest Fed Beige Book to entertain us. Judging from the cratering in some of the manufacturing and confidence indicators, the outlook might be rather dour from this most recent appraisal of the economy by the Fed, the question being whether the market is tiring of beating the dead horse that is the endless wait for Fed hints at the timing and size of QE. There was a good link from ftalphaville to a Sober Look blog post this morning discussing the increasing disconnect in consumer confidence and the US equity market.
Stay careful out there
Economic Data Highlights
- Switzerland August KOF Swiss Leading Indicator out at 1.57 vs. 1.45 expected and 1.41 in July.
- Sweden August Consumer Confidence out at 5.4 vs. 5.7 expected and 5.6 in July.
- Sweden August Manufacturing Confidence out at -9 vs. -3 expected and -3 in July.
- Germany Augsut Preliminary CPI out at +0.3% MoM and +2.0% YoY vs. +0.2%/+1.9% expected, respectively and vs. +1.7% YoY in July.
- Norway Norges Bank Deposit Rate left unchanged at 1.50% as expected.
- Canada July Industrial Product Price out at -0.5% MoM vs. +0.2% expected.
- Canada July Teranet/National Bank Home Price Index out at +0.7% MoM and +4.8% YoY vs. +0.5%/+4.6% expected, respectively and vs. +5.4% YoY in June.
- US July Pending Home Sales (1400)
- US Weekly DoE Crude Oil and Product Inventories (1430)
- US Fed Beige Book (1800)
- New Zealand July Building Permits (2245)
- Japan July Retail Trade (2350)
- New Zealand August NBNZ Activity Outlook (0100)
- Australia July Building Approvals (0130)