After a flat start to the day USD has started to climb again this afternoon on growing speculation that the FOMC may start raising interest rates soon. Press reports indicates that Atlanta Fed President Lockhart, a voter this year, indicated Tuesday that US data would have to deterioriate significantly to stop him from voting for an increase at the September meeting. This builds on the hawkish case which suggests the risks from waiting longer may be starting to outweigh the benefits.
On the news, the USD has been outperforming all other majors into the afternoon, with most down about 0.5% against the greenback. Fellow defensive currencies JPY, CHF and gold are all down a bit less than average along with CAD. The loonie’s blow has been cushioned a bit relative to others by a rebound in the oil price as oversold conditions start to ease but that didn’t stop USDCAD
from getting to $1.3200.
The WTI rebound helped Canadian stocks to post a gain on their return to trading Tuesday but US and European indices fell on the day. US stocks continue to be impacted by a number of factors including: headwinds from a more hawkish Fed, profit taking against earnings reports, and seasonality with the weakest time of the year historically for stocks looming ahead.
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AUD has remained strong for the most part overnight consolidating yesterday’s big pop after the RBA statement gave no indication of more rate cuts and Governor Stevens stopped talking the dollar down. The next potential big drivers for AUD and NZD are this week’s employment reports for New Zealand (today) and Australia (tomorrow). Wednesday’s US ADP payrolls report may also spark a move in USD which could impact other majors.
Stocks may also continue to be impacted by earnings reports and related factors. Apple has under pressure since its report last month and today the bottom fell out from under it after breaking its 200-day moving average, the $120.00 round number and then a 23% retracement of its 2014-2015 advance. Disney, Activision and First Solar all beat the street. Tesla Motors reports tomorrow after US markets close.
Walt Disney $1.45 vs street $1.41
Activision Blizzard $0.13 vs street $0.08, sales $759M vs street $667M, guides next Q sales to $930M above street $850M
First Solar sales $896M vs street $790M,guides next Q sales to $3.5-$3.6B above street $3.3B
Significant announcements released overnight include:
Canada manufacturing PMI 50.8 vs previous 51.3
US factory orders 1.8% as expected
UK construction PMI 57.1 vs street 58.5
Spain unemployment (74K) vs street (44K) and previous (95K)
Norway manufacturing PMI 45.8 vs street 44.0
Upcoming significant announcements include:
8:45 am AEST NZ unemployment rate street 5.9%
8:45 am AEST NZ employment change/quarter street 0.5%
8:45 am AEST NZ employment change/year street 3.4%
8:45 am AEST NZ average hourly earnings street 0.5%
12:00 am BST UK BRC shop prices previous (1.3%)
8:00 am BST Spain house transactions previous 6.0%
9:00 am BST Italy industrial production street 1.4%
10:00 am BST Eurozone retail sales street 2.0%
8:15 am EDT US ADP payrolls street 215K
8:30 am EDT US trade balance street ($43.0B)
8:30 am EDT Canada trade balance street ($2.9B)
10:30 am EDT US DOE crude oil inventories street (2.0 mmbbls)
Service / Non-Manufacturing PMI reports
9:30 am AEST Australia previous 51.2
11:35 an AEST Japan previous 51.8
11:45 am AEST China Caixin previous 51.8
12:15 pm AEST Singapore previous 51.1
3:00 pm AEST India previous 47.7
7:30 am BST Sweden previous 54.9
8:15 am BST Spain street 55.8
8:45 am BST Italy street 53.0
8:50 am BST France street 52.0
8:55 am BST Germany street 53.7
9:00 am BST Eurozone street 53.8
9:30 am BST UK street 58.0
9:00 am EDT Brazil previous 39.9
9:45 am EDT US Markit previous 55.2
10:00 am EDT US ISM street 56.2