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A Relatively Quiet Calendar Leaves Parliament and the GBP in Focus

Bob Mason

Earlier in the Day:

It was a relatively busy economic calendar through the Asian session this morning. Economic data included 2nd quarter GDP numbers out of Japan and July home loan figures out of Australia.

From the weekend, trade figures out of China failed to impress. China’s USD trade surplus narrowed from $44.58bn to $34.84bn in August. Exports fell by 1%, following a 3.3% rise in July. Economists had forecast a 2% increase. Imports fell by 5.6%, which was better than a forecasted 6% fall. In July, imports had also fallen by 5.6%.

In spite of the disappointing stats out of China, it was risk-on through the session, with the markets finding support from news of China stimulus.

The Asian markets also responded to a FED Chair Powell speech on Friday. While holding back from actually declaring a rate cut, the FED Chair insinuated support for the economy, which was considered to be a green light for a rate cut.

For the Japanese Yen

According to 2nd estimate figures released by Japan’s cabinet office, the economy grew by 1.3% in the 2nd quarter, year-on-year, revised down from 1.8%. Economists had forecast a 1.3% growth. The economy had grown by 2.2% in the 1st quarter.

Quarter-on-quarter, the economy grew by 0.3%, slowing from 0.6% in the 1st quarter. Economists had forecast the economy to grow by 0.3%, following the 1st estimate of 0.4%.

The Japanese Yen moved from ¥106.958 to ¥106.911 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.07% to ¥106.85 against the U.S Dollar.

For the Aussie Dollar

Home loans jumped by 5% in July, reversing a 0.9% fall in June, according to the ABS.

The Aussie Dollar moved from $0.68447 to $0.68477 upon release of the figures. At the time of writing, the Aussie Dollar was flat at $0.6846

Elsewhere

At the time of writing, the Kiwi Dollar was up by 0.12% to $0.6429. PBoC stimulus supported the Kiwi early on. There are no material stats due out until tomorrow to trouble the Kiwi Dollar.

The Day Ahead:

For the EUR

It’s another relatively quiet day ahead on the economic calendar. German trade data for July will provide the EUR with direction ahead of the European open.

Outside of the numbers, geopolitics will continue to garner plenty of attention as British PM Johnson looks to force a snap general election.

Any updates from the U.S or China on trade would also need monitoring throughout the day.

With the ECB expected to deliver on Thursday, the EUR may struggle to hold onto $1.10 levels early on the week.

At the time of writing, the EUR was down by 0.03% to $1.1026.

For the Pound

It’s a busy day ahead on the data front. Key stats include GDP, July industrial and manufacturing production figures and trade data.

Forecasts are for a further fall in both industrial and manufacturing production, which will weigh on the Pound. A widening in the UK trade deficit and continued contraction in the UK economy would also be negatives.

Any data-driven moves in the Pound will likely be short-lived, however, as the markets maintain focus on Brexit and UK politics.

The Pound found support last week and could see further upside in the day ahead should Johnson fail to find the votes for a snap general election.

Failure to get the votes leaves the British PM with few options to deliver his pledge to pull Britain out of the EU by 31st October. A resignation or a vote of no confidence are among his remaining options.

For now, a request for an extension of Brexit as per the newly passed legislation is key for the Pound. Assuming that the EU approves the extension, it will then come down to who will run the country, attempts to obtain more favorable terms with the EU and even a call for a 2nd referendum…

At the time of writing, the Pound was up by 0.07% to $1.2291.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the U.S to provide the Greenback with direction.

A lack of stats leaves the Greenback in the hands of geopolitics and sentiment towards monetary policy.

At the time of writing, the Dollar Spot Index was up by 0.04% to 98.433.

For the Loonie

It’s also a quiet day ahead on the economic calendar, with no material stats due out of Canada.

The lack of stats will leave the Loony more sensitive to market risk sentiment on the day. Trade data out of China failed to pressure the Loonie as the market’s sentiment towards stimulus continues to offset the effects of weak economic data.

The Loonie was up by 0.02% at C$1.3171, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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