he upward surge in stocks and commodities that kicked off the week has slowed overnight and into this morning as reality has set back in once again. The burst of enthusiasm over a potential delay to US interest rate liftoff may have been the last hurrah for the “bad news is good news crowd” which appears to have been short-lived. That is because today’s weakness in Germany factory orders and confirmation of a big increase in the US trade deficit.
A drop in US exports was blamed on a combination of weak economies overseas, and the stronger USD finally catching up to the US as well. This confirms that the reason the Fed may hold off raising rates is because of a weakening economy and worsening business conditions which could impact corporate earnings and resource demand.
Overall, the impact of the disappointing data has been moderate with US and European indices
trading just on either side of flat on the day. So far, this action still appears to represent a normal consolidation within an emerging seasonal uptrend as the big late summer seasonal correction winds down.
It’s not all doom and gloom out there though. Resource currencies continue to rebound led by NOK and SEK, while central banks in Australia and Poland declined to cut interest rates further, boosting AUD and PLN.
CAD, on the other hand, has been falling in recent trading on the news of a worse than expected Canadian trade deficit. The loonie could be active through the day with Canada Ivey PMI due mid- morning.
There are a number of speeches that could attract attention today, led by ECB President Draghi, with traders looking for signs of any plans to increase stimulus in the Eurozone. If he doesn’t give any, EUR could continue its rebound. FOMC speakers George (a known hawk) and Williams would be expected to continue to speak toward the potential for interest rate liftoff this year, any deviation from that or a dovish reaction to recent news could be considered a surprise.
PepsiCo $1.35 vs street $1.26
Volkswagen to delay or cancel all non-essential investments until its environmental scandal is sorted out (could be a long time…)
Significant announcements released overnight include:
Australia RBA interest rate 2.00% no change as expected
Poland interest rate 1.50% no change as expected
US trade balance ($48.3B) vs street ($48.0B) vs previous ($41.8B)
Canada trade balance ($2.5B) vs street ($1.1B)
Germany factory orders 1.9% vs street 5.6%
UK Halifax house prices 8.6% vs street 9.1%
Australia trade balance ($3.0B) vs street ($2.4B)
NZ NZIER Q3 bus survey (14) vs previous 5
India service PMI 51.3 vs previous 51.8
Upcoming significant announcements include:
9:15 am EDT FOMC George speaking
10:00 am EDT Canada Ivey PMI street 54.0
1:00pm EDT ECB Draghi speaking
5:30 pm EDT FOMC Williams speaking
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