Market action remained muted yesterday outside of bounces in the commodity currencies that were partially removed in the Asian session. The USDJPY and EURUSD continue to trade in extremely tight ranges, while the Scottish independence referendum may be wearing on GBP traders’ nerves.
The RBA minutes overnight failed to boost the AUD, even as the Reserve Bank of Australia warned strongly about the risks of a housing bubble in Australia. The RBA minutes otherwise merely suggested that the board members would prefer to keep rates on hold for the foreseeable future.
Rate expectations were unchanged on the other side of the release of the minutes. The RBA’s Christopher Kent was also out jawboning on the benefits of a weaker Aussie dollar and said the exchange rate “remains high”.
Also possibly weighing on the Aussie was news that China’s foreign direct investment numbers continue to contract sharply, with the lowest level in August since early 2012.
Looking ahead
UK inflation data is up today and may not receive much focus, given that Thursday’s referendum has distracted the market.
UK two-year rates have fully recovered back to the level after Bank of England governor Mark Carney delivered a blow with the August 13 quarterly inflation report.
We’ve also got UK employment data and the BoE meeting minutes tomorrow, prior to Thursday’s UK Retail Sales and the Scottish independence referendum. The GBPUSD in particular could be vulnerable to downside on negative surprises, given the strong USD of late. GBPUSD trend
Cable is continuing to exhibit textbook behaviour after the technical gap open from last Monday was closed precisely before downside pressure resumed. There is plenty of room for further downside in the near term on negative data surprises and even heightened anxiety ahead of the Scottish independence referendum Thursday.
Downward pressure on GBPUSD
German outlook
Look for whether the Germany ZEW today continues to show a deterioration regarding confidence in the economy. This expectations index is on the verge of going negative for the first time since late 2012. The current situation began turning lower in recent months as well. These survey trends tend to be rather persistent, particularly the current situation component. Watch out for Band of Canada governor Stephen Poloz out speaking as we look for follow-through higher in USDCAD. Otherwise, the focus will be on the interesting minor releases and announcements ahead of this week’s main events, starting with tomorrow’s critical FOMC meeting. I can’t underline enough the interesting sense that long bonds and currency markets seem to indicate robust prospects for the US economy. The assumption is that FOMC board of governors chair Janet Yellen and company will have very little to add to the slow, ponderous march forward with a full taper of asset purchases and an eventual first rate hike in late Q2 next year.
Something has to give, and it will be very easy for Yellen and company to surprise on the hawkish side. I suspect the bar is much higher for a dovish surprise.
Upcoming economic calendar highlights (all times GMT)
UK August CPI, RPI and PPI (0830) Germany September ZER Survey (0900) US August PPI (1230) Canada July Manufacturing Sales (1230) Canada Bank of Canada’s Poloz to Speak (1630) US July TIC flows data (2000) New Zealand Q2 Current Account Balance (2245)
UK inflation data is up today and may not receive much focus, given that Thursday’s referendum has distracted the market.
UK two-year rates have fully recovered back to the level after Bank of England governor Mark Carney delivered a blow with the August 13 quarterly inflation report.
We’ve also got UK employment data and the BoE meeting minutes tomorrow, prior to Thursday’s UK Retail Sales and the Scottish independence referendum. The GBPUSD in particular could be vulnerable to downside on negative surprises, given the strong USD of late. GBPUSD trend
Cable is continuing to exhibit textbook behaviour after the technical gap open from last Monday was closed precisely before downside pressure resumed. There is plenty of room for further downside in the near term on negative data surprises and even heightened anxiety ahead of the Scottish independence referendum Thursday.
Downward pressure on GBPUSD
German outlook
Look for whether the Germany ZEW today continues to show a deterioration regarding confidence in the economy. This expectations index is on the verge of going negative for the first time since late 2012. The current situation began turning lower in recent months as well. These survey trends tend to be rather persistent, particularly the current situation component. Watch out for Band of Canada governor Stephen Poloz out speaking as we look for follow-through higher in USDCAD. Otherwise, the focus will be on the interesting minor releases and announcements ahead of this week’s main events, starting with tomorrow’s critical FOMC meeting. I can’t underline enough the interesting sense that long bonds and currency markets seem to indicate robust prospects for the US economy. The assumption is that FOMC board of governors chair Janet Yellen and company will have very little to add to the slow, ponderous march forward with a full taper of asset purchases and an eventual first rate hike in late Q2 next year.
Something has to give, and it will be very easy for Yellen and company to surprise on the hawkish side. I suspect the bar is much higher for a dovish surprise.
Upcoming economic calendar highlights (all times GMT)
UK August CPI, RPI and PPI (0830) Germany September ZER Survey (0900) US August PPI (1230) Canada July Manufacturing Sales (1230) Canada Bank of Canada’s Poloz to Speak (1630) US July TIC flows data (2000) New Zealand Q2 Current Account Balance (2245)