FOMC Minutes
The market was only looking for hawkish surprises as it is virtually impossible to surprise on the dovish side of things in FOMC-land. There was mention in the minutes of finishing the third quarter off with a USD15 billion/month reduction of purchases at the October meeting rather than leaving a USD 5 billion/month remainder for the following meeting. There was some concern expressed on financial stability as well (see ZeroHedge passing along Hilsenrath comments ) – I am somewhat surprised that the market didn’t pay more attention to this, but perhaps the lack of a feeling that the FOMC is prepared to do anything besides “note their concern” is the reason that the June 2015 Fed Funds futures is trading a few ticks higher as the minutes were more thoroughly analysed last night.
Takeaway: Market taking it as a bit dovish, but I can’ imagine this has bigger implications for now. Let’s look for more reaction potential from next week’s (Tuesday and Wednesday) Yellen testimony before Congress.
Australian employment report
The headline payrolls number beat expectations slightly and AUD spiked higher on this news, but the internals of the payrolls change was less positive as virtually all of the growth was in part time positions. Worse yet, the unemployment rate pulled back higher to the cycle high at 6 percent rather than remaining steady at 5.9 percent. Optimists can say that this is due to a higher participation rate as more people return to the labor force – but let’s see what the coming months bring. For now, this was a net AUD negative.
Takeaway: This puts a cap on AUD for now and bears might get a bit more aggressive on the other side of this data, particularly if risk appetite is shaky – looking toward the 0.9320 support. EURAUD also a bit interesting – see charts below.
AUDUSD
AUDUSD very much in focus after the employment figures overnight – if we close here or lower today, we have a classic bearish reversal after the last few days of creeping higher from the important 0.9320 support, which is the next trigger for a test of the 0.9200 lows and possibly beyond.
EURAUD
EURAUD interesting picking up with the weak payroll figures overnight. Can’t help but believe that the EUR will do well from a “superior liquidity” perspective if we get a follow up sell-off in risk appetite. The market is rather short of EUR as a strong consensus trade. In any case, the bear market in EURAUD is very dead until proven otherwise and the bears will be fretting a rise through the 1.4600 should it materialise.
Looking ahead
Levels of import: 1.3650 looks very important for EURUSD (61.8 percent Fibonacci) - I would prefer for it to stay below there to maintain the bearish stance. Yesterday's attempt to reverse back higher in GBPUSD isn't looking convincing if we work below 1.7120 or so (very near at present). USDJPY - the recent low is 101.23, but the bigger level remains 100.75.
We have a Bank of England meeting on tap today with no move likely and the usual radio silence when no decision has been made.
Elsewhere, look for the Swedish CPI numbers for whether EURSEK is going to remain capped for now – this is the Riksbank’s prime focus at the moment. Norway is also out with CPI numbers and could be very sensitive to downside surprises. Then the usual weekly claims numbers from the US.
Stay careful out there.
Economic Data Highlights
- New Zealand Jun. BusinessNZ Manufacturing out at 53.3 vs. 52.6 in May
- UK Jun. RICS House Price Balance out at 53% vs. 55% expected and vs. 56% in May
- Japan Jun. PPI out at +0.2% MoM and +4.6% YoY vs. +0.1%/+4.5% expected and vs. +4.4% YoY in May
- Japan May Machine Orders out at -19.5% MoM and -14.3% YoY vs. +0.7%/+10.1% expected, respectively and vs. +17.6% YoY in Apr.
- Australia Jun. Employment Change out at +15.9k vs. +12k expected and -5.1k in May
- Australia Jun. Unemployment Rate out at 6.0% vs. 5.9% expected and 5.9% in May
- China Jun. Trade Balance out at +$31.56B vs. +$36.95B expected and +$35.92B in May
- Japan Jun. Consumer Confidence Index out at 41.1 vs. 40 expected and 39.3 in May
- Sweden Jun. CPI (0730)
- Norway Jun. CPI and PPI (0800)
- UK May Visible Trade Balance (0830)
- UK Bank of England rate and asset purchase target announcement (1100)
- Canada May New Housing Price Index (1230)
- US Weekly Initial Jobless Claims (1230)
- US Weekly Bloomberg Consumer Comfort Index (1345)
- US Fed’s George to Speak (1715)
- US Fed’s Fisher to Speak (2030)