Market Review for September 14, 2018

Economic data released through the Asian session this morning was on the heavier side, with key stats including August business PMI numbers out of New Zealand, August retail sales, fixed asset investment, industrial production and unemployment numbers out of China, with Japan’s finalized July industrial manufacturing production figure due out later in the session.

For the Kiwi Dollar, the business PMI rose from 51.2 to 52 in August, bringing to an end a downward trend that started back in May figures released in June, with the April’s PMI having hit a 58.9 high in figures released in May.

On the positive side:

  • Production returned to expansion, the sub-index rising from 49.2 to 52.6, with the new orders sub-index also rising, up from July’s 52.4 to 53.2 in August.

On the negative side:

  • Labour market conditions deteriorated, with the employment sub-index falling from 51.2 to 48.1, reflecting a contraction, a 3rd month in 4, where job contraction was reported.
  • Finished stocks also declined, in spite of job contraction, the sub-index falling from 53.5 to 51.4.

The Kiwi Dollar moved from $0.65755 to $0.65827 upon release of the PMI, which remained below a long run average of 53.4. At the time of writing, the Kiwi Dollar stood at $0.6582, up 0.21% for the session.

Out of China, economic data released early in the day was skewed to the positive:

  • Fixed Asset Investment rose by 5.3% in August, year-on-year, falling short of a forecasted and July 5.5%, the only negative of the day.
  • Industrial Production rose by 6.1% in August year-on-year, rising above a forecasted and July 6% rise.
  • Year-on-year, retail Sales rose by 9% in August, coming in ahead of a forecasted and July 8.8% increase.
  • The unemployment rate fell from 5.1% to 5.0% in August.

The Aussie Dollar moved from $0.71817 to $0.71877 upon release of the figures, before rising to $0.7190 at the time of writing, down 0.07% for the morning.

Elsewhere, the Japanese Yen was down 0.04% to ¥111.96 against the Dollar, ahead of the released of finalized July industrial production figures, with improved market risk appetite easing demand for the safe haven off the back of gains in the U.S equity markets overnight, better than expected stats out of China and renewed hopes of a resolution to the ongoing trade spat between the U.S and China.

In the equity markets, it was a positive start to the session, a softer Yen supporting a 0.83% rise in the Nikkei, with positive stats out of China supporting a 0.58% rise in the ASX200.

For the Hang Seng and CSI300, the pair were up 0.83% and by 0.2% at the time of writing, continued support coming from news earlier in the week of the U.S reaching out to China to resume trade talks, with this morning’s data out of China timely to for a continued recovery from the recent sell-off.

The Day Ahead:

For the EUR, stats scheduled for release through the morning include finalized August inflation figures out of Italy, together with 2nd quarter wage growth and July trade data out of the Eurozone.

On the data front, wage growth will likely garner some interest, though any upside may be limited should the Eurozone’s trade surplus narrow in line with or worse than forecasted.

The combination of softer inflation out of the U.S and a slightly more hawkish Draghi, even with the marginal downward revisions to economic growth projections has seen the EUR make strong gains against the Dollar this week, though it’s not just about the data and monetary policy, the news of the U.S reaching out to China to resume trade talks adding pressure on the Dollar earlier in the week.

At the time of writing, the EUR was up 0.05% to $1.1696, with trade chatter and today’s stats to provide direction through the day.

For the Pound, while it’s a quiet day on the data front, with no material economic data scheduled for release, BoE Governor Carney is due to speak before lunch, which could provide some direction for the Pound following Thursday’s unanimous vote to hold policy unchanged.

Speaking late Thursday, the BoE Governor spoke in frank terms to the government officials at number 10 of the likely impact of a “no-deal” on the UK. UK ministers were reportedly unimpressed with Carney’s doom and gloom assessment that included a collapse in the UK property market, a plunging Pound and a surge in mortgage rates. Interestingly, despite the fact that Carney and many others are of the view that the chances of a “no-deal” remain high, the Pound has managed to continue finding support on hopes of a deal that has yet to show signs of materializing.

At the time of writing, the Pound was up 0.05% to $1.3114, with Carney and Brexit the drivers for the day.

Across the Pond, it’s another busy day on the economic calendar, with key stats scheduled for release including August retail sales and industrial production figures, July business inventories and prelim September consumer sentiment numbers.

Following softer inflation figures on Thursday, the Dollar could face another tumble should retail sales figures disappoint, though in line with forecasts would likely be taken as a positive, giving the rest of the data influence, as the markets look for any hints of a slowdown that could be attributed to the ongoing trade war with China.

Outside of the stats, FOMC member Evans is scheduled to speak, any dovish chatter following Thursday’s inflation numbers likely to be music to the U.S President’s ears, with the Oval Office ever present to cause a few moves through the U.S session.

At the time of writing, the Dollar Spot Index was up 0.02% to 94.536.

For the Loonie, there are no stats scheduled for release, leaving the Loonie firmly in the hands of NAFTA, with negotiations yet to reach a conclusion in spite of frequent reports of imminent conclusions hitting the news wires.

At the time of writing, the Loonie was up 0.05% to C$1.2992 against the U.S Dollar.


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