– Risk assets rally post Spain budget announcement
– August IP weaker than expected in Japan, Korea, Thailand
– Swiss KoF likely fall
– We recommend EURUSD puts and short SGD against basket position
What to watch for today
CHF: KoF “catching down” with PMI. The market consensus is set for a drop in the Swiss KoF to 1.50 in September from 1.57 last month. This would be consistent with the weak Swiss PMI prints and would reduce the divergence between the two indicators. While the stabilization in the German PMI last week suggests some risk of an upside surprise, the growth outlook in Switzerland is still not robust enough to improve the deflation risks and warrant tighter policy. We expect the SNB to defend the 1.20 floor with utmost determination for the foreseeable future.
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