Previous Week Summary
Last week
was all about waiting and positioning ahead of Friday’s US NFPs. Stocks ended
the week more or less flat, most FX crosses traded within the ranges and
despite the EURUSD 30 pip spike higher after NFPs release, which was corrected
below 1.1200 later during US session, markets didn’t do much. One and only
exception was crude oil, which fell down 7% pushed lower as the markets are
oversupplied and the risk of no agreement outcome at Sep 26-28 OPEC is high. The
tensions among OPEC members are being felt in the market, despite Russian
President Putin calling for agreement on production freeze.
Monday – JP – Jobless rate reaching multi-decade low
levels at 3% but is it really helping the BoJ’s hunt for inflation? US Personal
income and spending for July rose and were in line with expectations, while
Core PCE was higher too and in line on monthly basis. The yearly one saw a
slight uptick higher versus expectations.
Tuesday – EZ – Business climate was worse and Consume
confidence dived (in line with expectations) in Aug while in US it hit the
highest level over the last year.
Wednesday – CN – PMI data were back to expansionary
territory again. EZ unemployment and CPI not boding well for ECB. US – ADP data
showed a nice rise to 177k vs 175k expected and Chicago PMI was worse.
Meanwhile, Pending Home sales rose in Aug. Brazil – President Rousseff was sent
back home but on the other side as expected, the BCB kept the rate unchanged at
14.25%.
Thursday – a bit of surprise for the market was PMI
Manufacturing figure from UK that jumped back to expansionary territory (to
53.3 vs 49.0 exp.). Very likely manufacturers got pleased my weaker GBP. The
Final US – Nonfarm productivity felt in line with expectations while ISM
Manufacturing PMI was the lowest over the last 3 months.
Friday – well, a big day in terms of expectations but not
reflected in the market…US NFPs rose 151k vs 180k exp., Unemployment rate was
slightly up to 4.9% vs 4.8% exp. as more people entered the job market but
Average hourly and weekly earnings slightly dropped. Maybe a summer kind of
vacation fever effect?
Despite
seasonality, the increase of 150k + revisions after two months of very huge
gains are a good case for Fed to raise the rate in Sep. More on nearing full
time employment and its effect on link . Lacker (a Fed hawk but non-voter) was out later
after NFPs saying that the Fed funds rate should be considerably higher. Bill
Gross of Janus as well as Goldman Sachs see the hike likely in Sep while Pimco and
Mohamed El-Erian from Allianz SE are not that much open to such a move in Sep.
From
corporate world – speculations about SolarCity and its ability to avoid
bankruptcy were circulating in the market. The EUR 13 bln back tax request for
Apple that was imposed by European Commission after it started to look closer
at Irish tax system is here and irritating Apple, Ireland and US. Are we just
ping-ponging the ball after the BNP USD 9 bln payout over US Sanction list or
US government just gave an idea to European Commission some time ago when they started
to complain about US multinationals trying to avoid paying taxes by moving
operations abroad?
Upcoming Week Outlook:
We have this week 3 rate
decisions (Australia, Euro Area and Canada) and the key event is the ECB
meeting. We also expect diary price index from New Zealand as the indicator of
one of the key sectors of the economy and GDP from Australia and Japan. We will
end the week with inflation figures from China and employment data from Canada.
Here are the details:
Monday (AUD, JPY, GBP):
We will start the week with the quarterly rate of change in operating
profits from Australian companies, which was declining in the recent months.
Traders will look for signs of recovery especially ahead of the rate decision
scheduled for Tuesday. Kuroda will speak in the middle of the Asian session and
the speech will be watched in respect to expected helicopter money and possible
hints regarding cooperation with government on the fiscal stimulus side. At the
beginning of the European session the UK Service sector PMI, which could bring
better than expected results due to a positive surprise in Manufacturing PMI
last week, will be watched. On Monday, we have bank holiday in US & CA, so
expect subdued liquidity.
Tuesday (AUD, USD,
CHF, NZD):
The first major central bank meeting of the month will
take place on Tuesday. Watch the RBA statement for insights how the policy
makers see the Australian economy after the August rate hike. At the beginning
of the US session, the ISM Services PMI will show whether the mood in the
sector is following the manufacturers. The Polish National Bank will meet also and
there is an increasing probability of a rate cut in the biggest V4 country. SNB’s
governor Jordan can bring some volatility to CHF crosses too but also kiwi
traders should follow the diary price index.
Wednesday (AUD, CHF, GBP,
CAD, USD, JPY):
Despite plenty of news ahead on Wednesday, don’t forget that traders
will be waiting for the ECB on Thursday, hence the liquidity will be dried up.
We are starting the day with Aussie GDP, which posted a surprise jump in
growth, but the Q2 GDP growth is usually much weaker than the previous figure.
At the beginning of European session change in UK home prices and manufacturing
production will be released, and both declined last months, while further
decline is expected mostly due to the Brexit vote. At the G20 meeting on Sunday,
Theresa May had to face quite serious Brexit warnings from US and Japan. The
Canadian rate decision is scheduled at the beginning of the US Session. The
country’s GDP declined last Q and the trade balance is in falling trend. The
dependence on oil with the depressed crude prices and the inflated housing
market are the key problems the nation’s facing. There is no change expected in
the overnight rate but the statement can cause some volatility. The same time
US job openings will be released with lower figures expected due to the job
market close to maximum employment. At the beginning of the Asian session
Japanese final GDP and Current account may give a boost to volatility. In case
of GDP decline the possibility of “helicopter money” topic will get back in
focus.
Thursday (CNY, EUR, USD, CAD):
The Chinese Trade Balance (rising since May) can create some volatility
in the early trading but all eyes will be on the ECB rate decision and press
conference later that day. The analysts are divided whether the ECB will act
now or will stay on hold as the PMI figures are close to pre-Brexit vote
levels. The same time with the press conference the Canadian housing market
data will be released and also Crude oil inventories can move the CAD crosses.
Providing the ECB will act, the following options could be considered:
Providing the ECB will act, the following options could be considered:
Extension of asset purchase (currently EUR 80 bln monthly until spring 2017
Change in the rules which corporate bonds could ECB purchase
Rate cut, the least likely option for the policy makers
Friday (CNY, GBP, USD, CAD):
Chinese inflation will start the data flow where both CPI and PPI will
be released by the National Bureau of Statistics . The consumer
inflation is slowing down for the 4th consecutive month and another
decline is expected. On the other hand producers prices are falling and even
the pace of decline is slowing, analysts expect another negative number. The
deficit of the UK Goods Trade Balance is expected to come out a little
narrower. Midday FOMC voting member Rosenberg speaks at South Shore Chamber
breakfast in Boston about the economic outlook that could cause some moves in
USD crosses. The Canadian Employment figures are out later and as the last month’s
data were not encouraging (both the Employment change and the Unemployment rate
came out worse than expected) the key is, if this was a temporary weakness or a
beginning of a negative trend for the nation.
Please check below the Event Risk Calendar for better overview and times. We prepared also a Central bank meeting schedule for september.
Don't forget to watch your risk and be consistent in trading.
Mr Hawk
& Mr Tech Man
DISCLAIMER: This material was created for informational
purposes only and represents the Land of Trading team’s view of the past and
current economic and capital market environment. It is not an investment advice
and should not be viewed that way at all, and the creators of this material
cannot be held liable for any potential losses resulting from trading, where
despite this disclaimer someone would consider this material as an investment
advice.
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