We managed all of 21 pips of trading range overnight in USDJPY as Japan released its latest raft of inflation and other data in yet another session of lacklustre action in currencies. The AUDUSD range was 14 pips. Let’s hope these last few days before the US three-day weekend (Monday is Labor Day) that marks the end of summer are also the end of the most excruciatingly boring summer doldrums I have witnessed in my career of trading the markets.
Japan’s jobless rate ticked higher again unexpectedly, to 3.8% vs. the 3.7% expected. This is still a relatively low official jobless rate, but keep in mind that the rate in the 60s and 70s was closer to 1%, and was 2.0-2.5% even during the early 90’s. Also keep in mind that this is less impressive given Japan’s rapidly shrinking workforce, which will fall something like 40% by 2050 from its current levels. The household spending data also came in weak, as did preliminary industrial production figures for July. Not much to recommend the JPY, in other words, though the market hardly reacted as USDJPY moves far more on US data than on Japan’s data releases.
European Central Bank policymaker Ewald Nowotny said that the ECB may forecast slower growth at next week’s ECB meeting, noting that Germany is “no longer able to be a locomotive for growth”.
Yesterday’s Ukraine developments (with President Petro Poroshenko cancelling a trip to Turkey as Russian troops had “invaded”, with that statement later partially retracted), and the general signs of the conflict escalating, have the ruble on the defensive, with USDRUB pushing toward the highs of the cycle around 37.00 this morning. European bourses and even the euro will remain a bit sensitive if the situation escalates further.
NZD weakened a bit further overnight on sharply weaker ANZ survey readings for August, but the move was not holding into this morning, suggesting some risk of the selling pressure on the currency easing up for the moment. Still, the data does further damage to the kiwi story and further weakness may lie in the weeks to come.
EURNOK should see a bit more volatility today on Norway’s data releases (unemployment rate and retail sales) this morning, as well as the latest Euro Zone inflation and unemployment rate data a bit later. A combination of in-line to stronger Norwegian data and a weak inflation reading from the EU today could see the pair pushing toward the ultimate supports just below 8.10, but volatility potential in the short term may be greater to the upside, given market positioning.
Looking ahead
Let’s keep in mind that today is the last trading day of the month, so there is some chance that today sees end-of-month fixing and flow activity that sparks a bit more activity than the flat-lining we've witnessed over the last few days.
Today sees a few interesting data points that should also garner some attention. First, we have Norway’s unemployment rate and retail sales data as NOK has traded rather strongly versus the market. The asymmetric risk there could be to the downside if the data proves weaker than expected as EURNOK has traded down toward key support lately.
Later this morning, we have the Eurozone inflation estimate for August as EURUSD has pushed back down toward the 1.3150 support. Later, Canada’s latest GDP data tells us whether the recent sell-off extends or is rejected, and the Federal Reserve-favourite US personal consumption expenditure inflation data will be the focus in the US early hours.
Next week is a busy one, with the usual major US ISM surveys and employment report and a pivotal ECB meeting, which is likely to not see the actual announcement of new quantitative easing, but where we’ll likely get a richer set of details on what the ECB is planning after Draghi so clearly set up greater expectations with his Jackson Hole rhetoric. A failure by Draghi to deliver would likely result in a EUR squeeze higher.
Economic data highlights
- UK Aug. GfK Consumer Confidence out at +1 vs. -1 expected and -2 in Jul.
- Japan Jul. Jobless Rate out at 3.8% vs. 3.7% expected and 3.7% in Jun.
- Japan Jul. Overall Household Spending out at -5.9% YoY vs. -2.9% expected and vs. -3.0% in Jun.
- Japan Jul. National CPI out at +3.4% YoY as expected and vs. +3.6% in Jun.
- Japan Jul. National CPI ex Fresh Food and Energy out unchanged at +2.3% as expected.
- Japan Jul. Retail Sales out at -0.5% MoM vs. +0.3% expected
- Japan Jul. Preliminary Industrial Production out at +0.2% MoM and -0.9% YoY vs. +1.0%/-0.1% expected, respectively and vs. +3.1% YoY in Jun.
- New Zealand Aug. ANZ Activity Outlook out at 36.6 vs. 45.1 in Jul.
- New Zealand Aug. ANZ Business Confidence out at 24.4 vs. 39.7 in Jul.
- Germany Jul. Retail Sales fell -1.4% and rose +0.7% YoY vs. +0.1%/+1.5% expected, respectively and vs. +0.1% YoY in Jun.
- Norway Aug. Unemployment Rate (0800)
- Norway Jul. Retail Sales (0800)
- Sweden Riksbank Publishes Banking Report (0800)
- Euro Zone Jul. Unemployment Rate (0900)
- Euro Zone Aug. CPI Estimate (0900)
- Canada Jun. GDP (1230)
- US Jul. Personal Income/Spending (1230)
- US Jul. PCE Deflator and PCE Core (1230)
- US Aug. Chicago PMI (1345)
- US Aug. Final University of Michigan Confidence (1355)
- Australia Aug. AiG Performance of Manufacturing Index (Sun 2330)
- Australia Aug. RPData/Rismark House Price Index (Mon 0000)
- China Aug. Manufacturing PMI (Mon 0100)
- Japan Aug. Final Markit/JMMA Manufacturing PMI (Mon 0135)
- China Aug. Final HSBC Manufacturing PMI (Mon 0145)