Market Brief
China’s decision to modify the way the PBoC sets the reference rate for the renminbi has drove both FX and equity markets for the past few days. Asian equity market returns are mixed this morning while Asian EM currency keep sliding slightly lower as traders finish digesting the news. Market participants still have to fully integrate the new dynamic use to set the reference rate in order to be able to anticipate, to some extent, future PBoC’s fixings. However, markets are now fully aware that they will have to deal with a more volatile yuan in the future as the market will play a bigger role in setting the fix. On Friday morning, the PBoC set the mid-point of the currency’s reference rate at 6.3975, down -0.05% from a day earlier. In the equity market, returns are mixed in Asia with Japan’s Nikkei 225 down -0.37% while the broader TOPIX index lost -0.04%. In Hong Kong, the Hang Seng edges lower by 0.04% while on the mainland, the Shanghai Composite adds 0.56% and the Shenzhen Composite 0.89%. S&P/ASX All Australian 200 shares fell -0.58% while in New Zealand, the stock market fell -0.72%.
In the FX market, AUD/USD rose 0.29% amid Christopher Kent’s optimistic comments about the job market. The RBA Assistant Governor declared that “there will be slightly less spare capacity in the labour market than earlier anticipated”, and added “even though measured GDP growth has remained moderate over the past year or so, the unemployment rate appears to have stabilized and demand for labour has picked up”. However, market’s response remained relatively muted as traders weigh the consequence of a weaker yuan on both the US and the Aussie economy.
In New Zealand, the Kiwi sank -0.46% against the US dollar as retail sales fell short of expectations. Q2 retail sales grew 0.1%q/q versus 0.5% median forecast while previous reading was downwardly revised from 2.7% to 2.3%. Bad news from New Zealand keep piling up and this last reading definitely increases the likelihood that the RBNZ will cut its official cash rate by 25bps to 2.75% at its next meeting on September 10.
In Europe, equity futures are hesitant this morning with most of equity indexes trading into negative territory. Euro Stoxx 50 edges lower by -0.06%, German DAX -0.10%, CAC 40 -0.17%, SMI -0.10 and FTSE 250 +0.09%. French Q2 GDP was due earlier this morning and printed slightly below markets’ expectations at 1%y/y versus 1.1% consensus. German’s Q2 GDP was also due and came in at 0.4%y/y (SA) while analysts were looking for 0.5%. As a result, EUR/USD move a few pips higher ahead of euro zone GDP and US PPI and industrial production due later today.
Today traders will be watching GDP from Italia and Eurozone; manufacturing sales and existing home sales from Canada; industrial production, producer price index, capacity utilization and Michigan sentiment index from the US.
Today's CalendarEstimatesPreviousCountry / GMT SW Jun Service Production MoM SA 0.70% -0.50% SEK / 07:30 SW Jun Service Production YoY WDA - 1.60% SEK / 07:30 IT 2Q P GDP WDA QoQ 0.30% 0.30% EUR / 08:00 IT 2Q P GDP WDA YoY 0.50% 0.10% EUR / 08:00 UK Jun Construction Output SA MoM 2.00% -1.30% GBP / 08:30 UK Jun Construction Output SA YoY 3.30% 1.30% GBP / 08:30 EC 2Q A GDP SA QoQ 0.40% 0.40% EUR / 09:00 EC 2Q A GDP SA YoY 1.30% 1.00% EUR / 09:00 EC Jul CPI MoM -0.60% 0.00% EUR / 09:00 EC Jul F CPI YoY 0.20% 0.20% EUR / 09:00 EC Jul F CPI Core YoY 1.00% 1.00% EUR / 09:00 BZ Aug FGV Inflation IGP-10 MoM 0.49% 0.75% BRL / 11:00 TU TCMB Turkey Survey of Expectations - - TRY / 11:30 CA Jun Manufacturing Sales MoM 2.70% 0.10% CAD / 12:30 US Jul PPI Final Demand MoM 0.10% 0.40% USD / 12:30 US Jul PPI Ex Food and Energy MoM 0.10% 0.30% USD / 12:30 US Jul PPI Ex Food, Energy, Trade MoM 0.10% 0.30% USD / 12:30 US Jul PPI Final Demand YoY -0.90% -0.70% USD / 12:30 US Jul PPI Ex Food and Energy YoY 0.50% 0.80% USD / 12:30 US Jul PPI Ex Food, Energy, Trade YoY 0.70% 0.70% USD / 12:30 CA Jul Existing Home Sales MoM - -0.80% CAD / 13:00 CA Bloomberg Aug. Canada Economic Survey - - CAD / 13:00 US Jul Industrial Production MoM 0.30% 0.30% USD / 13:15 US Jul Capacity Utilization 78.00% 78.40% USD / 13:15 US Jul Manufacturing (SIC) Production 0.40% 0.00% USD / 13:15 US Aug P U. of Mich. Sentiment 93.5 93.1 USD / 14:00 US Aug P U. of Mich. Current Conditions 106.5 107.2 USD / 14:00 US Aug P U. of Mich. Expectations 85 84.1 USD / 14:00 US Aug P U. of Mich. 1 Yr Inflation - 2.80% USD / 14:00 US Aug P U. of Mich. 5-10 Yr Inflation - 2.80% USD / 14:00 BZ Jul Formal Job Creation Total -113950 -111199 BRL / 22:00 IN Jul Exports YoY - -15.80% INR / 22:00 IN Jul Imports YoY - -13.40% INR / 22:00 BZ Jun Economic Activity MoM -0.50% 0.03% BRL / 22:00 BZ Jun Economic Activity YoY -1.30% -4.75% BRL / 22:00 IN Jul Trade Balance -$11100.0M -$10827.0M INR / 22:00 Currency Tech
EUR/USD
R 2: 1.1436
R 1: 1.1278
CURRENT: 1.1167
S 1: 1.0819
S 2: 1.0660
GBP/USD
R 2: 1.5930
R 1: 1.5803
CURRENT: 1.5624
S 1: 1.5330
S 2: 1.5171
USD/JPY
R 2: 135.15
R 1: 125.86
CURRENT: 124.23
S 1: 120.41
S 2: 118.89
USD/CHF
R 2: 1.0129
R 1: 0.9984
CURRENT: 0.9751
S 1: 0.9571
S 2: 0.9072