fter Friday’s big nonfarm payrolls spike, it comes as no surprise really that USD has dropped back to start the week, enabling other currencies to rebound, particularly SEK and GBP. AUD, on the other hand, has been underperforming its peers as yesterday’s weak China import figures raised concerns about the prospects for China’s biggest resource suppliers.
China’s economy may remain in focus over the next couple of days. Inflation figures out this morning may give an indication of how much scope the PBOC has to cut interest rates further (likely still a lot). Tomorrow’s industrial production and retail sales figures, meanwhile, may indicate how much pressure the PBOC is under (or not) to take additional stimulus steps.
Signs of softness in China trade dragged on indices there and Australia to start the week and this malaise has circled the globe. European indices have been falling amid signs of political unrest in Spain, a weaker than expected German trade balance, and rumours the ECB may only be considering a deposit rate cut not the big new round of QE the street has been hoping for have all combined to drag on stocks. Germany, which had soared Friday as EUR plunged following the US payrolls report, dropped back in a normal trading correction.
Similarly, US stocks have been held back today on more signs that the Fed may be about to raise interest rates. Former doves continue to throw in the towel with Chicago Fed President Evans indicating that while he prefers interest rate liftoff in 2016 he would not necessarily dissent against a December rate hike if the majority of members want one. Later in the day, Boston Fed President Rosengren highlighted that the growing US economy was not really impacted by emerging markets (read China) turbulence last summer, so December could be appropriate for rate liftoff as indicated in the last FOMC statement. Both men indicated that they would like to pace of increases after liftoff to be gradual.
Coming out of an earnings season where previous gains have continued to be a big drag on corporate earnings, the prospects for another potential USD rally have received a tepid response from US traders wary of its potential impact on the earnings of US based exporters and multinationals.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
OECD GDP forecasts
World 2015 cut to 2.9% from 3.0% 2016 cut to 3.3% from 3.6%
US 2015 raised to 2.4% from 2.0% 2016 cut to 2.5% from 2.6%
China 2015 raised to 6.8% from 6.7% 2016 steady at 6.5%
Japan 2015 cut to 0.6% from 0.7% 2016 cut to 1.0% from 1.2%
Eurozone 2015 cut to 1.5% from 1.6% 2016 cut to 1.8% from 1.9%
Canada housing starts 198K vs street 200K
Germany trade balance €19.4B vs street €20.0B
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 AEDT Australia home loans street 0.0%
12:30 pm AEDT China consumer prices street 1.5%
12:30 pm AEDT China producer prices street (5.9%)
12:00 am GMT UK BRC same store sales street 0.8% vs previous 2.6%
7:45 am GMT France industrial production street 1.8%
8:30 am GMT Sweden Riksbank minutes
9:00 am GMT Norway consumer prices street 2.3%
9:00 am GMT Italy industrial production street 1.4%
10:00 am GMT Greece consumer prices previous (1.7%)
11:55 am EST Bank of Canada Wilkins speaking
5:15 pm EST FOMC Evans speaking
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