Dollar continues to trade in mixed mode today, weakening mildly against euro and swiss franc but strengthened against others. We'd maintain that markets reactions showed traders are not too convinced of a rate hike by Fed in September. More evidence is still needed to push the dollar higher. A few important economic data will be released later this week. But the more market moving event is possibly the speech by Fed vice chair Stanley Fischer today. Another major focus is developments in US equities. DJIA closed below 55 weeks EMA last week which is taken as another sign of weakness. We repeatedly mentioned the risk of medium term trend reversal in DJIA for some time, pointing to bearish divergence condition in weekly MACD. But no sustainable selling was seen yet. We'll keep an eye on whether the reversal has finally arrived.
Released over the weekend, China's trade surplus narrowed to USD 43b in July, down from USD 46.5b a month ago. In value terms, exports plummeted -8.3% yoy, compared with a 2.8% yoy growth in June. Imports declined -8.1% yoy, worsening from a -6.1% drop in June. Looking into imports for commodities, crude oil imports soared 29.3% yoy in volume terms, but fell -25.6% in value terms. Iron ore imports grew 4.3% yoy in volume terms but -29.3% yoy lower in value terms. The implied iron ore price rose modestly to USD 62/tonne in July, up from USD 58.3/tonne a month ago. Copper imports dropped -9.9% in value terms, but added 7.6% in volume terms. Separately, the country's headline CPI rose 1.6% yoy in July, accelerating from 1.4% a month ago. Core inflation, excluding food and energy prices, gained 1.7% yoy. Food prices rose 2.7% yoy, up from 1.9% in June, whist nonfood prices moderated to 1.1% yoy from 1.2%. Despite the strong headline reading, the growth was mostly driven by a jump in food inflation. Meanwhile, PPI deflation worsened to -0.7% m/m in July. From a year ago, the reading was deteriorated to -5.4%, the fastest pace of decline in 6 years.
Released today, Japan current account surplus narrowed to JPY 1.3T in June. Consumer confidence dropped to 40.3 in July. Eco watcher current index rose to 51.6 in July. From Eurozone, Sentix Investor Confidence dropped to 18.4 in August. Looking ahead, the week isn't too busy. Main focus will be employment data from UK, retail sales fro US and German ZEW and GDP from Eurozone.
Here are some highlights for the week:
- Tuesday: Australia NAB business confidence; German ZEW; Canada housing starts; US non-farm productivity
- Wednesday: BoJ minutes; China industrial production; UK employment; Swiss ZEW
- Thursday: Japan machine orders; Swiss PPI; US retail sales
- Friday: New Zealand retail sales; Eurozone GDPs; US PPI, industrial production; U of Michigan sentiment