We had another session of consolidation for currencies in the Asian session with a mild short-squeeze, despite an overwhelming risk-off mood, the feature of early trading.
EURUSD managed to squeeze up to the 1.2890 level having survived a test of the 200-day moving average overnight. However, piled-up sell orders ahead of 1.29 proved too strong for a more sustained recovery. Spain’s 2013 budget announcement later today and bank stress test results tomorrow remain areas of concern capping the EUR’s rebound.
There was not much on the data front. Industrial profits data out of China showed that Chinese corporates continue to battle the ongoing economic slowdown. Profits fell 6.2 percent in August from a year ago to Yuan 381.2 bln. On a year-to-date basis industrial sector profits were down 3.1 percent from a year earlier. The data echoes weak factory (IP languishing at 39-month lows) and exports data for the month.
In contrast, sentiment among New Zealand corporates is holding up well despite the global slowdown and a relatively firm NZD. NBNZ’s monthly business activity outlook showed a net 29.3 percent of companies expecting their business to grow in the next 12 months compared with a 26.4 percent optimism level in August. From a confidence perspective, a net 17 percent of respondents expected the economy to improve over the next 12 months, a slight deterioration from the 19.5 percent last month.
Lastly, job vacancies in Australia rebounded in the 3 months to August with a pickup in private sector vacancies outweighing the lowest reading for public vacancies in 8 years. Vacancies rose 4.2 percent in the period, recouping most of the revised 5.4 percent losses suffered the previous month.
Spain proved to be a major pressure point for the EUR in early European trading yesterday with anti-austerity protest, talk of Catalan separatism and possible Q3 growth downgrades from the Bank of Spain all adding to the pressure. Spanish yields also edged higher with 10-years back above 6 percent. Indeed, EURUSD spent most of the session languishing near the 2-month lows with limited bounces before intra-day short covering lifted the pair into the close. 200-day MA support is still intact at 1.2825.
The lone US data point was a disappointment with the usually buoyant housing data contradicting the recent trends. Headline new home sales fell 0.3 percent m/m, well below the consensus 2.2 percent and the 3.6 percent increase last month, but most of the declines were in the South with other regions seeing small increases. Wall Street faced its fifth straight day of declines as European woes weighed. The DJIA closed -0.33 percent, S&P -0.57 percent and the Nasdaq -0.77 percent.
Data Highlights
- GE Sep. CPI out at flat m/m, +2.0% y/y, both as expected and 0.4%/2.1% prior resp.
- US Aug. New Home Sales out at -0.3% m/m vs. +2.2% expected and +3.6% prior
- NZ Sep. NBNZ Activity Outlook out at 29.3 vs. 26.4 prior
- NZ Sep. NBNZ Business Confidence out at 17.0 vs. 19.5 prior
- AU Aug. Job Vacancies out at +4.2% q/q vs. revised -5.4% prior
- China Aug. Industrial Profits YTD out at -3.1% y/y vs. -2.7% prior
(All Times GMT)
- GE Import Price Index (0600)
- Sweden Household Lending (0730)
- GE Unemployment Rate (0755)
- EU Euro-zone M3 Money Supply (0800)
- UK Final Q2 GDP (0830)
- UK C/A Balance (0830)
- EU Business Climate Indicator (0900)
- EU Euro-zone Confidence Indicators (0900)
- US Final Q2 GDP (1230)
- US Durable Goods Orders (1230)
- US Initial Jobless Claims (1230)
- GE Bundesbank’s Weidmann to speak (1300)
- US Bloomberg Consumer Comfort Index (1345)
- US Pending Home Sales (1400)
- US Kansas City Fed Manufacturing Activity (1500)