tock markets in the US and Canada have returned to trading on a positive note with traders who had jumped ship before the Labour Day holiday weekend scrambling to get back on board. This enabled markets to maintain the positive momentum from yesterday’s strong finish to Asia Pacific trading and keep the party going into today’s trading.
There isn’t much in the way of scheduled economic news for Asia Pacific countries today, so China may remain in focus for stocks and commodities. Japan may also attract attention from traders looking for a possible catch up move after Japan underperformed yesterday.
In currency markets, there has been a clear rotation out of defensive havens like JPY, CHF and gold back into risk markets. EUR and USD have also been in the bottom half of the league table. GBP, meanwhile, has been gaining and could remain active this week as more UK data keeps speculation trading going on when the Bank of England could start raising interest rates.
Commodities have been rebounding today, led by crude oil and copper as many traders appear to have shrugged off weak China imports to focus on exports that weren’t bad as feared, and an improved Eurozone GDP report to suggest the demand outlook for resource could improve. AUD, NZD, CAD and NOK have all benefitted from renewed interest in commodity currencies.
We also may traders start to position ahead of two central bank meetings expected over the next 24 hours in Canada and New Zealand.
The Bank of Canada is scheduled to report its decision Wednesday morning local time (Wednesday late evening in Asia Pacific countries). The central bank cut interest rates by 0.25% at its last meeting and is expected to remain on hold this time around. Canada data has been mixed lately. Much was made of the country falling into a technical recession in Q2, but that was before the last rate cut.
More recently, improved employment, trade (especially outside resources), and retail sales data suggests the positive benefits of the lower loonie for the broader economy have started to kick in. Plus, inflation continues to run well above 2.0%. Based on this, the Bank of Canada is likely to remain on hold for a while and assess the impact of its two previous rate cuts before considering if any more stimulus is needed.
A decision to go on hold is unlikely to have much impact on CAD trading which has stabilized as the WTI oil price has rebounded a bit. A surprise rate cut, however, could drive CADUSD down through the base that has been forming near $0.7500 ($1.3320 ceiling for USDCAD
The latest RBNZ decision is scheduled for Thursday morning local time (Wednesday afternoon in North America). After raising interest rates four times last year, the RBNZ cut rates at its last two meetings, is expected to cut by 0.25% this week and to finish giving it all back at its next meeting. In the last month, New Zealand, PMI, trade, retail sales and other data have been soft, so there’s no reason to think it won’t keep cutting back toward 2.50% over the next two meetings.
After a big decline, NZD has been stabilizing of late along with commodity prices. A 0.25% cut may not have much impact. A decision to go on hold could be seen as hawkish and spark a bigger rebound while a surprise 0.50% could get traders wondering how poor New Zealand economic conditions are which could send the kiwi dollar down sharply.
There have been no major corporate announcements after the US close today.
Significant announcements released overnight include:
Eurozone Q2 GDP update 1.5% vs street 1.2%
UK same store sales (1.0%) vs street 0.9%
Germany trade balance €25.0B vs street €23.5B
Upcoming significant announcements include:
10:30 am AEST Australia consumer confidence previous 99.5
11:30 am AEST Australia home loans street 0.8%
3;00 pm AEST Japan consumer confidence street 40.5
12:00 am BST UK BRC shop prices street (0.2%)
9:30 am BST UK industrial production street 1.4%
9:30 am BST UK manufacturing production street 0.5%
9:30 am BST UK trade balance street (£1.9B)
3:00 pm BST US NIESR GDP estimate previous 0.7%
10:00 am BST Greece industrial production street (7.5%)
10:00 am BST Greece consumer prices street (1.9%)
8:15 am EDT Canada housing starts street 190K
8:30 am EDT Canada building permits street (5.0%)
10:00 am EDT Canada interest rate 0.50% no change expected
1:30 pm EDT Canada to introduce new bank note, coin and stamp to commemorate Queen Elizabeth II becoming Canada’s longest reigning monarch.
9:00 am NZST Thu NZ interest rate 0.25% cut to 2.75% expected
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