Aussie Dollar Drops After Bond Sale, Euro at Risk on German GDP

2016-08-12 04:13:00

Talking Points:

Australian Dollar drops after 7-year government bond auction results
Euro may decline if 2Q German GDP figures stoke ECB easing bets
US retail sales, consumer confidence data may drive Fed speculation

The Australian Dollar underperformed in overnight trade, falling after the results of a 7-year government bond auction crossed the wires. The bid-to-cover ratio registered at 2.39 and the average yield posted at 1.71 percent, down from 3.00 and 1.73 percent recorded the last time analogous paper was sold in late July.

The results point to reduced demand and weaker rate expectations, which may imply bets on further RBA easing ahead. Indeed, front-end borrowing costs fell alongside the currency. Traders are currently pricing in at least one more 25bps reduction in the cash rate over the coming 12 months. The Yen weakened as Japan’s benchmark Nikkei 225 index advanced, eroding demand for the anti-risk currency.

Looking ahead, second-quarter German GDP figures enter the spotlight. Output is expected to add 0.2 percent, marking the smallest gain since the third quarter of 2014. A soft result may weigh on risk appetite, punishing sentiment-geared currencies including the Aussie. It may also fuel ECB stimulus expansion bets, sending the Euro downward.

Later in the day, the spotlight turns to July’s US Retail Sales report and Augusts’ preliminary University of Michigan consumer confidence reading. Receipts growth is expected to slow (0.4 percent vs. 0.6 percent prior) while sentiment firms (91.5 vs. 90.0 prior). It will be curious to see if the results create momentum in the priced-in Fed rate hike outlook, where indecision has prevailed for the past three weeks.

What do retail traders’ buying and selling decisions say about FX price trends? Find out here !

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:30	NZD	BusinessNZ Manufacturing PMI (JUL)	55.8	-	57.6
22:45	NZD	Retail Sales Ex Inflation (QoQ) (2Q)	2.3%	1.0%	1.0%
01:30	AUD	Credit Card Purchases (AU$) (JUN)	25.5b	-	26.0b
01:30	AUD	Credit Card Balances (AU$) (JUN)	52.2b	-	51.9b
02:00	CNY	Industrial Production (YoY) (JUL)	6.0%	6.2%	6.2%
02:00	CNY	Industrial Production YTD (YoY) (JUL)	6.0%	6.0%	6.0%
02:00	CNY	Retail Sales (YoY) (JUL)	10.2%	10.5%	10.6%
02:00	CNY	Retail Sales YTD (YoY) (JUL)	10.3%	10.3%	10.3%
02:00	CNY	Fixed Assets Ex Rural YTD (YoY) (JUL)	8.1%	8.9%	9.0%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
06:00	EUR	German Wholesale Price Index (MoM) (JUL)	-	0.6%	Low
06:00	EUR	German Wholesale Price Index (YoY) (JUL)	-	-1.5%	Low
06:00	EUR	German CPI (MoM) (JUL F)	0.3%	0.3%	Medium
06:00	EUR	German CPI (YoY) (JUL F)	0.4%	0.4%	Medium
06:00	EUR	German GDP SA (QoQ) (2Q P)	0.2%	0.7%	High
06:00	EUR	German GDP WDA (YoY) (2Q P)	1.4%	1.6%	High
06:00	EUR	German GDP NSA (YoY) (2Q P)	2.8%	1.3%	High
08:00	EUR	Italian GDP (QoQ) (2Q P)	0.2%	0.3%	Medium
08:00	EUR	Italian GDP (YoY) (2Q P)	0.8%	1.0%	Medium
08:30	GBP	Construction Output (MoM) (JUN)	-1.0%	-2.1%	Low
08:30	GBP	Construction Output (YoY) (JUN)	-2.1%	-1.9%	Low
09:00	EUR	Eurozone Industrial Production (MoM) (JUN)	0.5%	-1.2%	Low
09:00	EUR	Eurozone Industrial Production (YoY) (JUN)	0.7%	0.5%	Low
09:00	EUR	Eurozone GDP (QoQ) (2Q P)	0.3%	0.3%	High
09:00	EUR	Eurozone GDP (YoY) (2Q P)	1.6%	1.6%	High