China released the initial tranche of its August data at the weekend and the rather non-descript results led to a slightly weaker tone for the AUD at the start of trading today.
On the inflation front, CPI was in line with expectations but, at +2.0 percent y/y is higher than the 1.8 percent seen in July (and the first month-on-month increase since February) while PPI continued to show benign tendencies, extending falls to a sixth month with a 3.5 percent y/y drop, larger than the 3.2 percent expected and steeper than the 2.9 percent decline seen in July. In other data, industrial production slid to +8.9 percent y/y from 9.2 percent last month and is the slowest pace of growth in more than 3 years. Retail sales just about hung on to its steady growth with a +13.2 percent y/y increase (from 13.1 percent last but hovering near 2-1/2 year lows. AUD gave back a small portion of Friday’s post-NFP gains 20-25 points) at the open but held a tight range for the rest of the session.
In other China data released today, the trade surplus increased to $26.66 bln in August, but purely as a result of lower imports. Imports fell 2.6 percent from a year ago, confounding expectations of a 3.5 percent increase and a marked slowdown from the +4.7 percent posted last month. Exports held up (relatively) well with a 2.7 percent y/y gain from +1.0 percent in July. The AUD had another brief dip after the data (10 points versus the USD and 20 points versus the JPY while the Australian share index drifted into negative territory.
Elsewhere, Japan halved the first estimate of its Q2 growth, slashing it to just +0.7 percent q/q from the preliminary 1.4 percent as the external situation in Europe and China took its toll. With the government’s eco-car subsidy programme reaching its conclusion, the outlook for Q3 looks bleak with a contraction in growth sincerely on the cards. The next BOJ meeting is on September 18-19 and no doubt expectations will rise for another stimulus package.
Friday was all about the US non-farm payroll report with elevated expectations in the run-up to the data severely dashed. The US only added 96k jobs in August, lower than the 130k expected and a downward revision by 22k removed any positive hopes. The headline unemployment rate looked good but purely explained away by a slide in the participation rate. The weaker data saw markets focusing on a higher chance of a QE announcement by the Fed at Thursday’s meeting and as a result the USD slid and US Treasuries rallied with EURUSD hitting its highest in 3-1/2 months.
Canada, in contrast, announced some better data with 34.3k jobs added in August, fully-reversing the 30.4k jobs lost the previous month, and a steady unemployment rate of 7.3 percent. In addition, the Ivey PMI was not as soft as market expectations and held near 5-months highs at 62.5.
Data Highlights
US Aug. Change in Non-farm Payrolls out at +96k vs. 130k expected and revised 141k prior
US Aug. Unemployment Rate out at 8.1% vs. 8.3% expected and 8.3% prior
CA Aug. Ivey PMI out at 62.5 vs. 59.0 expected and 62.8 prior
China Aug. CPI out at +2.0% y/y, as expected vs. 1.8% prior
China Aug. PPI out at -3.5% y/y vs. -3.2% expected and -2.9% prior
China Aug. Industrial Production out at +8.9% y/y vs. 9.0% expected and 9.2% prior
China Aug. Retail Sales out at +13.2% y/y vs. 13.2% expected and 13.1% prior
NZ Q2 Manufacturing Activity out at -1.1% q/q vs. revised -1.5% prior
UK Aug. Lloyds Employment Confidence out at -43 vs. -51 prior
JP Q2 Final GDP out at +0.7% q/q vs. 1.0% expected and 1.4% prior
JP Jul. C/A Balance out at +¥625.4b vs. +¥485.6b expected and +¥433.3b prior
JP Aug. Bank Lending out at +1.1% y/y, as expected vs. revised +0.9% prior
AU Jul. Home Loans out at -1.0% m/m vs. flat expected and revised +1.0% prior
NZ Aug. REINZ House Price Index out at +1.3% m/m vs. -0.7% prior
China Aug. Trade Balance out at +$26.66 bln vs. +$19.5 bln expected and +$25.15 bln prior
China Aug. Exports out at +2.7% y/y vs. +2.9% expected and +1.0% prior
China Aug. Imports out at -2.6% y/y vs. +3.5% expected and +4.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Consumer Confidence (0500)
JP Economy Watchers’ Surveys (0600)
Sweden Industrial Production/Orders (0730)
Norway CPI/PPI (0800)
EU Sentix Investor Confidence (0830)
Andrew Robinson,
SAXO BANK