orth Americans returned to mixed trading in world markets and a focus on what central banks may or may not do in terms of tightening or stimulus this month.
USD and the Fed stole the spotlight after US non-manufacturing PMI came in well below expectations both on the headline number and the forward looking new orders component, confirming last week’s poor US manufacturing PMI report and indicting a summer slowing in the US economy. This weakness is more likely due to business holding back ahead of a hotly contested election with very different policy stances creating uncertainty rather than structural problems.
US PMI reports this month have been poor enough for the street to consider the potential for a September interest rate increase as less likely even though Fed hawks have been suggesting last week’s soft job report was not soft enough to derail them. Today’s news drove down USD to 1% losses relative to JPY, EUR, GBP, and AUD and a 0.7% loss relative to CAD while the percent chance of a September increase priced in by Fed Funds dropped to 24% having been well over 30% as recently as last week.
In addition to what the Fed might do later in the month, speculation surrounding central banks may dominate today’s trading with traders still reacting to yesterday’s RBA meeting and looking ahead to today’s meetings in Sweden, Poland and Canada plus the ECB meeting later this week and the Bank of Japan meeting later this month.
AUD has been climbing since the RBA held interest rates steady, choosing not to cut rates at Governor Stevens last meeting. Today, AUD could be active around construction PMI and GDP reports which may indicate whether the RBA may be under pressure to cut rates again this year of go on hold for a while.
CAD has been climbing at a slower pace than some of its peers today ahead of tomorrow’s Bank of Canada meetings. Oil price action has been mixed and some traders may be worried about a possible rate cut catching them off side. I think a rate cut this time is unlikely as the Bank of Canada remains likely to hold off until it has a better idea of whether the Canadian economy has rebounded from the spring wildfire disaster in Alberta or not. The statement may indicate if the bank is willing to leave the door open to a future rate cut or not.
Sterling’s recovery accelerated against USD today UK PMI reports continued to indicate the UK economy accelerating out what has turned out to be a small post-Brexit speed bump with fears of a Brexit recession fading fast. Today’s UK industrial production, house price and GDP data may provide more fuel to a recovery trend or dampen spirits.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
US ISM non-manufacturing PMI 51.4 vs street 55.0
US ISM non-manufacturing new orders 51.4 vs previous 60.3
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:30 am AEST Australia construction PMI previous 51.6
11:30 am AEST Australia GDP street 3.3% vs previous 3.1%
7:00 am BST Germany industrial production street 0.2%
8:30 am BST Sweden interest rate (0.50%) no change expected
9:00 am BST Norway industrial production previous (8.7%)
2:00 pm BST Poland interest rate 1.50% no change expected
8:30 am BST UK Halifax house prices street 7.0% vs previous 8.4%
9:30 am BST UK industrial production street 1.9%vs previous 1.6%
9:30 am BST UK manufacturing production street 1.7% vs previous 0.9%
3:00 pm BST UK NIESR GDP estimate street 0.3%
10:00 am EDT Canada interest rate 0.50% no change expected
10:00 am EDT Canada Ivey PMI street 56.5
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