Talking Points:
- US Dollar Underperforms as Market Turmoil Boosts T-Bonds, Sinks Yields
- Euro and Yen Rise on Risk Aversion, Canadian Dollar Corrects Downward
- British Pound May Advance as Upbeat UK PMI Data Drives BOE Outlook
The US Dollar underperformed in overnight trade, falling as much as the 0.3 percent on average against its top counterparts. The move tracked a slide in front-end Treasury bond yields, pointing to eroding Fed rate hike expectations as the likely catalyst. For its part, the move in rates seemed to reflect safe-haven demand for US debt amid continued risk aversion, but may have likewise reflected perceptions of falling probability for tightening at this month’s FOMC meeting given a backdrop of market angst. The MSCI Asia Pacific regional stock index fell 1.6 percent, extending the turmoil started at the weekly trading open.
The Euro and the Japanese Yen continued to outperform as the slump in sentiment continued to fuel the unwinding of carry trades funded in the two low-yielding currencies. The Canadian Dollar corrected lower having soared alongside crude oil prices in the preceding session. That move followed the release of the OPEC monthly bulletin, where the cartel said it was willing to work with other global suppliers on a “fair” oil price. The markets appeared to interpret the statement as hinting that OPEC was willing to reduce crude output, though no specifics actually emerged.
Looking ahead, the spotlight turns to Augusts’ UK Manufacturing PMI figures. The pace of factory-sector activity growth is expected to accelerate for a second consecutive month, hitting the strongest level since March. UK economic news-flow has increasingly outperformed relative to consensus forecasts over the past month, opening the door for an upside surprise. Such an outcome may rekindle BOE interest rate hike speculation, particularly after seemingly hawkish comments from Mark Carney over the weekend, and boost the British Pound.
On the sentiment front, S&P 500 index futures are trading down nearly 2 percent in late Asian market hours, hinting that the risk-off mood is likely to carry forward as European and North American bourses come online. Investors will look to the US ISM Manufacturing report to continue the evolution of Fed policy expectations. Economists envision a slight down-tick but a recent string of data outcomes beating forecasts may pave the way for an unexpectedly firm print that inspires fears of on-coming tightening, compounding the markets’ dour mood.
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Asia Session
| GMT | CCY | EVENT | ACT | EXP | PREV |
|---|---|---|---|---|---|
| 22:45 | NZD | Terms of Trade Index (QoQ) (2Q) | 1.3% | -2.5% | 1.2% |
| 23:30 | AUD | Weekly Consumer Confidence Index | 113.3 | - | 113 |
| 23:30 | AUD | AiG Perf of Mfg Index (AUG) | 51.7 | - | 50.4 |
| 23:50 | JPY | Capital Spending (YoY) (2Q) | 5.6% | 8.8% | 7.3% |
| 23:50 | JPY | Capital Spending Ex Software (2Q) | 6.6% | 10.9% | 8.1% |
| 23:50 | JPY | Company Profits (2Q) | 23.8% | 2.2% | 0.4% |
| 23:50 | JPY | Company Sales (2Q) | 1.1% | - | -0.5% |
| 00:00 | AUD | CoreLogic RP Data House Px (MoM) (AUG) | 0.3% | - | 2.8% |
| 00:00 | NZD | QV House Prices (YoY) (AUG) | 11.3% | - | 10.1% |
| 01:00 | CNY | Manufacturing PMI (AUG) | 49.7 | 49.7 | 50 |
| 01:00 | CNY | Non-manufacturing PMI (AUG) | 53.4 | - | 53.9 |
| 01:30 | AUD | BoP Current Account Balance (2Q) | -19.0B | -15.9B | -13.5B |
| 01:30 | AUD | Net Exports of GDP (2Q) | -0.6 | -0.3 | 0.5 |
| 01:30 | AUD | Building Approvals (MoM) (JUL) | 4.2% | 3.0% | -5.2% |
| 01:30 | AUD | Building Approvals (YoY) (JUL) | 13.4% | 10.1% | 13.5% |
| 01:35 | JPY | Nikkei Japan PMI Mfg (AUG F) | 51.7 | - | 51.9 |
| 01:45 | CNY | Caixin China PMI Mfg (AUG F) | 47.3 | 47.1 | 47.1 |
| 01:45 | CNY | Caixin China PMI Composite (AUG) | 48.8 | - | 50.2 |
| 01:45 | CNY | Caixin China PMI Services (AUG) | 51.5 | - | 53.8 |
| 04:30 | AUD | RBA Cash Rate Target | 2.00% | 2.00% | 2.00% |
| 05:00 | JPY | Vehicle Sales (YoY) (AUG) | 2.3% | - | -1.3% |
| 06:30 | AUD | Commodity Index AUD (AUG) | 79.7 | - | 80.6 |
| 06:30 | AUD | Commodity Index (YoY) (AUG) | -20.9% | - | -19.1% |
European Session
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
|---|---|---|---|---|---|
| 07:30 | CHF | PMI Mfg (AUG) | 49.8 | 48.7 | Medium |
| 07:45 | EUR | Markit/ADACI Italy Mfg PMI (AUG) | 55.0 | 55.3 | Low |
| 07:50 | EUR | Markit France Mfg PMI (AUG F) | 48.6 | 48.6 | Low |
| 07:55 | EUR | German Unemployment Change (AUG) | -4K | 9K | Medium |
| 07:55 | EUR | German Unemployment Claims Rate (AUG) | 6.4% | 6.4% | Medium |
| 07:55 | EUR | Markit/BME Germany Mfg PMI (AUG F) | 53.2 | 53.2 | Medium |
| 08:00 | EUR | Markit Eurozone Mfg PMI (AUG F) | 52.4 | 52.4 | Medium |
| 08:00 | EUR | Italian Unemployment Rate (JUL P) | 12.7% | 12.7% | Low |
| 08:00 | EUR | Italian Unemployment Rate Quarterly (2Q) | 12.5% | 12.4% | Low |
| 08:30 | GBP | Net Consumer Credit (JUL) | 1.2B | 1.2B | Low |
| 08:30 | GBP | Net Lending Sec. on Dwellings (JUL) | 2.7B | 2.6B | Low |
| 08:30 | GBP | Mortgage Approvals (JUL) | 68.1K | 66.6K | Medium |
| 08:30 | GBP | M4 Money Supply (MoM) (JUL) | - | -0.5% | Low |
| 08:30 | GBP | M4 Money Supply (YoY) (JUL) | - | -0.3% | Low |
| 08:30 | GBP | M4 Ex IOFCs 3M Annualised (JUL) | - | 3.8% | Low |
| 08:30 | GBP | Markit UK PMI Mfg (AUG) | 52.0 | 51.9 | High |
| 09:00 | EUR | Eurozone Unemployment Rate (JUL) | 11.1% | 11.1% | Medium |
| 09:00 | EUR | Italian GDP (QoQ) (2Q F) | 0.2% | 0.2% | Medium |
| 09:00 | EUR | Italian GDP (YoY) (2Q F) | 0.5% | 0.5% | Medium |
Critical Levels
| CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
|---|---|---|---|---|---|---|---|
| EURUSD | 1.1009 | 1.1110 | 1.1161 | 1.1211 | 1.1262 | 1.1312 | 1.1413 |
| GBPUSD | 1.5178 | 1.5276 | 1.5310 | 1.5374 | 1.5408 | 1.5472 | 1.557 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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