A quiet start, but plenty of major economic data coming our way this week

Good morning

Well what a scorcher of a weekend.  Saturday was warm, but not too warm to have me working in the garden all day long.  And when I say all day, I’m talking 12 hours or so of hard graft.  By Sunday I was good for nothing, which was handy as it was really too hot to do much at all, and according to the forecast it is going to be even warmer today, hitting highs over 30°c.  There isn’t much on the economic calendar today so if it does get unbearable then we may be able to slip away from our desks relatively unnoticed. 

Last week saw some volatility in the markets, equities dumped on Monday but by the end of the week had clawed back most, if not all, of those losses.  Currencies were volatile on the back of this, GBP saw some wild moves but like the equities, is pretty much back to where it started last week.  GBPUSD for example traded down from the Monday morning highs around 1.2800 to 1.2665 on Thursday, before hitting highs around 1.2770 on Friday afternoon, indeed it traded up to 1.2780 earlier this morning. 

GBPEUR saw some decent swings as well, moving down from around 1.1700 to 1.1595 by Thursday, only to push back up to 1.1695 on Friday, and even had a little push over 1.1700 this morning.   

Not to be outdone, Yen saw some decent moves as well, USDJPY trading down to around 141.70 before hitting a high of 147.90 just a couple of days later.  For GBPJPY, this meant a low of 180.10 and a high around 188.35.

So what will this week bring?  Well, not much today perhaps, but things certainly pick up through the rest of the week.  From the UK we have unemployment early tomorrow, inflation Wednesday, GDP Thursday and retail sales Friday.  We also have US inflation Wednesday and retail sales and jobless claims Thursday, with EU GDP Wednesday.  Some big data there that the central banks will be watching closely, eyes as always firmly on the US data which may or may not give us any clues as to the Fed decision next month.  US headline inflation is expected at 2.9%, with core at 3.2%.  Anything lower will boost the chances of a rate cut, possibly a 50bps cut, but if the numbers disappoint to the upside those rate cut expectations could easily be trimmed.

Early Wednesday morning we will have the latest rate decision from RBNZ.  Regular readers may remember that earlier this year there was a real feeling that RBNZ may have to increase further from its 5.5% level.  Since then rates have been left unchanged and RBNZ have moved from a hawkish to stance to a slightly more dovish stance.  NZD weakened after their last meeting in July and has moved even lower since, as the market expects the dovish tone to increase.  Some are even talking of a rate cut this week, although the general feeling is that October is more likely, 

Elsewhere, Romanian inflation released this morning showed a greater than expected uptick to 5.4% from below 5% the previous month.  The higher number follows last week’s rate cut, EURRON wasn’t really moved on either announcement. 

The Olympics has finished, and having been pretty nonplussed about the event before it started, I am going to miss the twelve hours of non-stop sport we have enjoyed for the past couple of weeks.  There were plenty of highlights, the breakdancing unfortunately was not one of them, although the poor Australian lady who entertained us last week could probably earn a living out of her performance if she played her cards right.  A healthy medals haul by GB, surpassing Tokyo’s total, was great to see.  US topped the table with 126 medals including 40 golds, China were second with 91 medals but equalling USA’s 40 gold medals.

Football was underway at the weekend, Man City just edged Man Utd in the Community Shield after scoring an equaliser in the last minute of full time and going on to win on penalties.  Mark may be happy with Leeds 3-3 draw in their opening match of the season against Portsmouth, it looked like Portsmouth had won it with a penalty two minutes into injury time, only for Leeds to equalise three minutes later.  The Premier league begins this Friday with Man Utd playing Fulham.

Have a great day, enjoy the sunshine if you can.

-  19.00 US monthly budget statement

-  01.30 AUS Westpac consumer confidence

-  02.30 AUS wage price index

-  07.00 UK unemployment

GBP benefits as sentiment turns more favourable

Good morning

US jobless claims have, in all the time i’ve worked in finance, never been one of the key releases.  However, yesterday they came in a touch under expectations and it seemed to convince the market that a hard landing for the US economy was less likely, USD pushed higher as interest in larger Fed rate cuts waned, while equities pushed higher and all of a sudden the panic was over.  Really?  Seems a lot to pin on one piece of weekly economic data. 

Asian equities ended generally higher, futures prices point to higher equities in Europe this morning as well.  We’ve seen the US dollar weaken since, the better risk sentiment reversing the moves we saw earlier in the week.  GBPUSD had traded as low as 1.2670 after the release, EURUSD slipped to 1.0880, but they have since made gains, currently 1.2765 and 1.0925 as I type.  GBP has been the winner here, with GBPEUR pushing up from just below 1.1600 yesterday morning to 1.1685. 

Quite why GBP has benefitted more is a bit of a mystery although it could be a simple case that it had suffered more on the way down and therefore should gain more on the way up.  Some logic in that. 

Some Fed officials have been speaking on US rates, some are dovish.  Schmid says a rate cut will be appropriate if inflation continues to come lower, Barkin says the Fed have time to decide how much they will need to cut.  However Goolsbee has said he’s not sure a rate cut before the election is a good idea, preferring to take in a bit more employment data before making a decision. Trump meanwhile has said on CNBC that the President should have a say in interest rate decisions and that he, as a successful businessman, has a better instinct for these things that many people at the Fed.  Oh dear.

With limited economic data today, just Canadian employment numbers on the calendar, the markets could well settle down and reflect on the turmoil earlier in the week and be thankful it seems to have passed.  Incredible how we ignored a 12% decline in the Nikkei, and almost ignored the rally that followed that has seen it back up to 35,000.

So, what else to watch?  Well the Olympics of course, where GB’s Johnson-Thompson will be looking to hold her lead in the heptathlon with three events to go.  More climbing on offer, not the speed stuff but the boulder climbing which sees competitors scale impossible looking walls to earn points, 4x400m relay heats and 4x100 finals, a couple of my favourite events.  This afternoon I think we may have break-dancing, which I am sure will look spectacular but I’m not convinced it should be an Olympic sport.  

Speaking of Olympic sports, did anyone see the synchronised swimming, or artistic swimming as I think it is now known.  Always something of a laughing stock, but I have to say I caught some of it and was absolutely mesmerised.  Well worth looking up the US and Chinese displays, silver and gold medallists respectively. 

I mentioned yesterday how close we are to the start of the new football season.  The Championship kicks of today, as do League One and League Two.  Tomorrow the two Manchester teams play in the Community Shield, City looking for revenge over their FA cup defeat to their local rivals. 

The weather is going to be good over the weekend.  I need to get out and mow the lawn which has been neglected since I had my shoulder operation and as such will be a pretty big job.  If I can get that done tomorrow I might treat myself to a day of rest on the 30°c temperatures forecast for Sunday.

Have a great weekend

-  13.30 CAD unemployment

Stability returns to the markets...for now

Good morning

UK and EU stocks closed on a positive note yesterday although US stocks closed slightly lower.  Asian equities were mixed, as are futures prices this morning which show some gains for the US but small declines for the UK and EU.  While the direction is uncertain, it is good to see more stable markets.

Looking at currencies, GBP continues to look a bit vulnerable, GBPUSD now at 1.2700 which is actually where it was around this time yesterday, while GBPEUR is a smidge lower at 1.1610 having very briefly broken down through 1.1600 overnight, the lowest level since April.  EURUSD looks comfortable at 1.0940 and even USDJPY has been reasonably stable, now 146.00, although there are still warnings of potential huge unwinds in yen cross carry trades.

AUD pushed a little higher after RBA’s Bullock mentioned she would not hesitate to raise interest rates should the need arise.  RBA had kept rates unchanged at their meeting earlier this week but did consider pushing rates higher and now see inflation back to target levels even later than previously thought.  GBPAUD now 1.9380, a fair bit lower than the highs we saw earlier this week. 

NZD dipped on lower inflation expectations, nothing too dramatic but will certainly get thoughts of an RBNZ rate cut back on the agenda.  AUDNZD pushed up from 1.0865 to 1.0940, helped by both the stronger AUD and weaker NZD, it is now 1.0915, GBPNZD at 2.1160.

I don’t often mention the Swiss Franc but I note that USDCHF traded as low as 0.8450 this week, EURCHF was down to 0.9215 and GBPCHF to 1.0750.  Those pairs are all slightly higher now but the renewed strength of CHF is causing concern among Swiss manufacturers, who are lobbying the SNB to do something.  I’m not sure what they really can do, CHF is attractive as a safe haven and with the geopolitical risks still running high it is no surprise CHF is sought after.

Romania did cut rates 25bps to 6.5% yesterday as had been expected, the second consecutive cut.  EURRON was hardly impacted on the announcement and eyes now on their next meeting on 4th October.

Ukrainian forces have attacked a town in the Kursk region of Russia, a rare foray into the Russian mainland.  Details are not clear, nor is the driving factor behind the decision to attack, although it would seem the hope is that Russian forces will have to be redirected to the area, reducing their ability to attack Ukraine on the front line. 

Meanwhile, Israel are still awaiting a response by Iran and its allies to the recent attacks by Israeli forces on Hamas and Hezbollah leaders.  Retaliation had been expected earlier in the week, there is some suggestion now that Iran may not retaliate, but it is far too early to hope for a de-escalation in the region.

Olympics today brings quite a lot of athletics, with women’s heptahlon and the 4 x 100m relay heats later this morning, plus the finals of the speed climbing just before midday.  Plenty of cycling through the afternoon, then more athletics with the mens 200m final probably the highlight this evening.

Those missing football will be pleased to hear the new season is almost upon us, with the first matches in the Championship taking place tomorrow evening and the Community Shield between the two Manchester sides on Saturday.  Premier league action starts next Friday.

The weather today here looks pretty decent for now although its not very warm and rain is expected through the afternoon.  Things do perk up a bit from tomorrow and I see Sunday and Monday could well be back in the 30’s.  I’m looking forward to that.

Not much on the calendar today, nor Friday for that matter. 

Have a great day 

-  13.30 US initial jobless claims

-  20.00 Feds Barkin speaks

-  02.30 China CPI

-  07.00 German HICP