In the equity markets, it was back in the red for the majors, the Nikkei and ASX200 down 1.04% and 0.71% respectively ahead of the close, with the CSI300 and Hang Seng sliding by 1.92% and 1.44% respectively, the majors in the process of reversing gains from the start of the week, as Trump gave the markets a stark reminder of his unrelenting desire to rebalance the trade book.
S&P 500 and Dow futures were down 0.7 percent and 0.75 percent, respectively, pointing to a lower open for Wall Street later in the day.
Economic data released through the Asian session was on the lighter side this morning, with key stats limited to consumer sentiment and home loan figures out of Australia and tertiary industry activity index numbers out of Japan.
For the Aussie Dollar:
The Westpac Consumer Sentiment index jumped by 3.9% in July, following a 0.3% rise in June, the index hitting its highest level since the latter part of 2013.
Year-on-year, the index was up 9.8% to 106.1, with the government’s recent promise of cutting income taxes, coupled with improved sentiment towards the Australian economy driving the index northwards.
- The economic conditions next 12-months sub-index, jumped by 3.9%, with sentiment towards the economy over the next 5-years up a whopping 9.8%.
- Additionally, family finances vs a year ago the sub-index increased by 2.3%, with the family finances next 12-months sub-index rising by more than 2%.
While sentiment towards the Australian economy improved, with the latest government promise of tax cuts easing some pressure on household disposable incomes, the sub-indexes reflecting the outlook for consumer spending were somewhat less impressive, suggesting that there may be more pain ahead for the retail sector:
- The time to buy a dwelling sub-index fell by 2.5%, with the outlook for house prices sliding by 6.2%.
- The time to buy a major household item reversed June’s 1% rise, falling 1.7% in July.
The Aussie Dollar moved from $0.7420 to $0.74215 upon release of the figures.
Home loans rose by 1.1% in May, following April’s 1.4% decline, which was better than a forecasted 1.9% fall.
The Aussie Dollar moved from $0.74143 to $0.74215 upon release of the figures before pulling back to $0.7409 at the time of writing, down 0.67% for the morning, positive stats through the day having little impact as trade war jitters resurfaced.
For the Japanese Yen, Japan’s tertiary industry activity index rose by 0.1% in May, which was better than a forecasted 0.4% fall, following April’s 1% rise, according to figures released this morning.
The Yen moved from ¥111.044 to ¥111.015 against the Dollar upon release of the figures before easing to ¥111.05 at the time of writing, down 0.05% for the morning, the risk off sentiment failing to drive the Yen back through to ¥110 levels.
Elsewhere, the Kiwi Dollar slumped 0.41% to $0.681 through the session, renewed trade war jitters doing the damage as the markets responded to Trump’s threat of $200bn more.
For the EUR, there are no material stats scheduled for release through the day, leaving direction in the hands of ECB President Draghi and the Oval Office as fears of more punitive trade tariffs resurface.
While there are no material stats scheduled for release, ECB President Draghi is scheduled to speak in the early part of the day that could provide direction for the EUR, though we wouldn’t expect Draghi to deliver anything too hawkish should he touch on policy.
At the time of writing, the EUR was down 0.14% to $1.1727, trade tariffs and Draghi in focus through the day.
For the Pound, there are no also material stats scheduled for release through the day, following the uptick in economic growth in May.
Mixed data on Tuesday that included softer than expected manufacturing production and an unexpected fall in industrial production, coupled with resignations of high profile members of the Conservative Party, may be an issue for the BoE and a rate hike next month, a possible General Election certainly good reason for the BoE to delay any near-term moves on rates.
BoE governor Carney, scheduled to speak this afternoon, could provide the Pound with another bounce should he maintain his view on the economy and rates, though the Pound is set up for a fall following events in Whitehall at the start of the week.
At the time of writing, the Pound was down 0.14% to $1.3258, with Brexit and Carney the key drivers through the day.
Across the Pond, stats are limited to wholesale inflation figures, which are forecasted to reflect softer inflationary pressures in June that would be a negative for the Dollar should the numbers be in line with or worse than forecasted.
While some direction will come from the numbers, noise from the Oval Office will continue to be a factor through the day, though the latest tariff bomb from the U.S President failed to cause too much damage for the Dollar, with the Dollar Spot Index up 0.09% to 94.247 at the time of writing, following Tuesday’s 0.09% gain.
Across the border, it’s a big day for the Loonie, with the Bank of Canada’s interest rate decision due out later today alongside release of the BoC’s monetary policy report, rate statement, with the BoC press conference later in the day.
While economic data out of Canada has continued to support a near-term rate hike, the markets anticipating a move later today, how the Loonie responds to today’s hike will be dependent upon the tone of the BoC, anything dovish likely to see the Loonie pull back to C$1.32 levels against the U.S Dollar, with the recent reversal from $1.29 levels coming off the back of an expectation that the BoC will look to reassure the markets that rate hikes will remain gradual.
At the time of writing, the Loonie was down 0.21% to C$1.3141, with trade war chatter and today’s BoC forward guidance on policy the key drivers, a 0.25 percentage point hike largely priced in.