Asia was again content to mark time in currency markets with the overnight moves forcing consolidation again at lower levels.
US 10-year yields continued their recent march higher with gains up to the 200-day MA and this enabled USDJPY to push higher to fresh 4-1/2 week highs (and coincidentally halting at the 200-day MA as well). There was not much activity into the morning fix, but the push higher was helped by news that Tatsuo Yamasaki, the official who helped orchestrate Japan’s largest ever currency intervention in the early 2000s, is to head up the Ministry of Finance’s International Bureau. That is worth monitoring on the intervention front.
Elsewhere, currencies were steady, with the AUD pressured marginally after August consumer inflation expectations fell to 2.4% from 3.3% the previous month while average weekly wages for May were lower, implying inflation threats are receding/non-existent. PM Gillard noted that the Australia’s manufacturing industry is facing challenges from the high AUD (recall latest manufacturing PMI was at its lowest since June 2009 and has been in contraction since February this year.) In other news, BHP Billiton warned of job losses at coal mines as the global economy slows, as reported by Reuters. If the mining/resource sector retreats, what hope is there for the Australian economy?
New Zealand’s manufacturing sector slid into contraction territory for the first time since April, with the new orders component the only category registering above 50. The negative was offset somewhat by the latest Fonterra auction, which saw dairy prices rising by 7.8% following a 3.5% increase at the previous auction. NZDUSD’s 13 point day range was established in one hour.
The EUR retreated back to Monday’s opening levels overnight as the US Dollar remained bid following some mixed data. US yields continued to edge higher with 10-yr govt. yields rising to 1.815%, some 43 basis points above the low seen in July. USDJPY extended its gains. GBP again received a fillip from better UK data (jobless claims fell for the second month and the ILO unemployment rate dipped to 8.0% from 8.1%) but again the bounce proved short-lived as the US Dollar extended its gains.
The mixed US data saw consumer inflation slowing to zero m/m and 1.4% y/y with core prices moving in the same direction while the Empire manufacturing survey was a disappointing -5.85 from +7.39 (+7.0 expected). On a more positive note, industrial production and capacity utilization edged higher in July (+0.6% m/m and 79.3% respectively while the NAHB housing market index pushed to its highest level since February 2007 and refreshed the view that the US housing market is rebounding. The housing data was perhaps the biggest trigger in the rise in US yields, with QE3 hopes pushed further to the back burner.
Data Highlights
- US Jul. CPI out at flat m/m, +1.4% y/y vs. 0.2%/1.6% expected and flat/1.7% prior resp.
- US Jul. Core CPI out at +0.1% m/m, +2.1% y/y vs. 0.2%/2.2% expected and 0.2%/2.2% prior resp.
- Aug. Empire Manufacturing out at -5.85 vs. +7.0 expected and 7.39 prior
- US Jun. Net Long-term TIC Flows out at +$9.3 bln vs. +$40.0 bln expected and revised +$55.9 bln prior
- US Jul. Industrial Production out at +0.6% m/m vs. 0.5% expected and revised 0.1% prior
- US Jul. Capacity Utilization out at 79.3% vs. 79.2% expected and 78.9% prior
- US Aug. NAHB Housing Market Index out at 37 vs. 35 expected and 35 prior
- NZ Jul. Business PMI out at 49.4 vs. revised 50.0 prior
- AU Aug. Consumer Inflation Expectation out at 2.4% vs. 3.3% prior
- AU May Avg. Weekly Wages out at +0.4% q/q, +3.4% y/y vs. 1.1%/4.4% prior resp.
- China Jul. Actual FDI out at -8.7% y/y vs. -2.5% expected and -6.9% prior
(All Times GMT)
- UK Retail Sales (0830)
- EU Euro-zone CPI (0900)
- Swiss ZEW Survey (0900)
- CA Int’l Securities Transactions (1230)
- CA manufacturing Sales (1230)
- US Initial Jobless Claims (1230)
- US Housing Starts (1230)
- US Building Permits (1230)
- US Bloomberg Consumer Comfort (1345)
- US Bloomberg Economic Expectations (1345)
- US Philadelphia Fed Index (1400)