Yahoo Finance Inflation and the EUR in Focus, as Trade War Jitters Linger
Earlier in the Day:
There were no material stats released through the Asian session this morning to provide direction, with the Asian markets having an opportunity to respond to Trump’s late Friday continued call for tariffs on the additional $200bn worth of Chinese goods.
With the U.S equity markets larger gains coughed up in response to Trump’s latest comments, it was a mixed bag through the early part of the day.
For the Aussie Dollar, the scheduled release of the RBA meeting minutes tomorrow provided some support at the start of the day, the Aussie Dollar up 0.04% to $0.7156 at the time of writing, with the minor gain coming amidst concern that China may ultimately decline the olive branch from the U.S following Trump’s push for additional tariffs.
The Aussie Dollar found support from the last RBA Rate Statement earlier in the month, leading to expectations of a more hawkish RBA, though there are plenty of headwinds to consider that could temper any Aussie Dollar rally.
Things were not so rosy for the Kiwi Dollar, which was down 0.26% to $0.6555, a forecasted pickup in 2nd quarter economic growth, figures due out later in the week, not enough to provide support, with trade war jitters weighing at the start of the week. While the recent movements in the Kiwi Dollar can be closely linked to Trump’s tweet account and sentiment towards trade, a pickup in 2nd quarter growth could question whether the RBNZ can maintain its particularly bearish outlook on policy.
For the Japanese Yen, the 0.07% rise to ¥111.98 was a relatively modest one at the start of the week, with the markets looking to Beijing for a response to Trump’s call for more Chinese goods to be hit with tariffs, any suggestion of Beijing shunning the latest invitation to talks likely to see the Yen take a run at ¥110 levels.
Focus this week is on Japan’s trade and inflation figures and on the BoJ monetary policy decision, who could surprise the markets, while unlikely as concerns continue to linger over the lasting effects of the ongoing trade war on demand for Japanese goods.
In the equity markets, it was a mixed bag at the start of the week, the Nikkei up 1.2%, supported by the Yen sitting at just shy of ¥112 levels and the ASX200 up 0.23%, bouncing back from early losses, while the CSI300 and Hang Seng resumed their downward trends in response to Trump’s Friday night call for more Chinese goods to be tariffed. At the time of writing, the CSI300 and Hang Seng were down 1.13% and by 1.77%. The Hang Seng’s only one stock was in the green, with tech stocks amongst the worst hit, Tencent Holdings down 3.39%, Sunny Optical down 4.69% and AAC Tech down 5.58%, the sector particularly sensitive to trade war chatter.
The Day Ahead:
For the EUR, stats through the day are limited to August inflation figures, which are forecasted to be EUR positive, barring any deviation from prelim for the annual core and headline rates of inflation, focus being on the month-on-month move in consumer prices.
While inflation remains a consideration for the ECB and monetary policy, the fact that the annual rate of core inflation continues to sit well below the close to 2% objective means that sentiment towards trade and market risk appetite in general may ultimately overshadow any effects from today’s data.
At the time of writing, the EUR was up 0.09% to $1.1635, with trade chatter and today’s stats to provide direction, some Dollar weakness in the early part of the day contributing to the upside in the EUR.
For the Pound, there are no material stats scheduled for release through the day, leaving Brexit news updates to provide direction for the Pound. While key later in the week will be the EU Summit in Salzburg, where the British PM will be looking to garner support for the much talked about Chequers plan that has left her exposed politically at home. While sentiment towards Brexit and hopes of a deal continue to support the Pound, how EU leaders will view the Chequers plan will be key and could be the much needed ammunition Theresa May needs when she returns to the negotiating table to wrap things up ahead of a November deadline.
At the time of writing, the Pound was up 0.08% to $1.3079, with Brexit the driver for the day.
Across the Pond, it’s a relatively quiet day on the data front as the FED goes into its blackout period ahead of next week’s policy decision. Data scheduled for release is limited to September’s NY Empire State manufacturing numbers, which are forecasted to be Dollar negative. Recent stats have yet to show any illeffects of the ongoing trade war with China, so any particularly soft numbers could hit the Dollar, though its safe haven status and trade war chatter will likely overshadow.
The markets are now looking at a September and December rate hike, the probability of a December hike rising sitting at around 80%. For the Dollar to take a hit, the numbers will need to be particularly dire, the Dollar being driven by the ongoing jitters and policy outlook. A shift in either and the Dollar would be at risk of a reversal.
At the time of writing, the Dollar Spot Index was down 0.03% to 94.895.
For the Loonie, economic data scheduled for release is limited to July foreign security purchases that are unlikely to have a material influence on the Loonie, the market continuing to focus on NAFTA and the lack of progress to-date.
At the time of writing, the Loonie was up 0.02% to C$1.3034 against the U.S Dollar.
This article was originally posted on FX Empire
