AUD Jobs Data Beats Expectations
AUDUSD outperformed overnight after the July employment numbers rose more than expectations (+14.0k vs +10.0k cons, -28.3k revised from -27.0k last), though the time series remains volatile and the split between full and part time workers was fairly even. The jobless rate fell to +5.2% vs +5.3% cons. Tier-1 data from China showed that industrial production slowed to 9.2% y/y (9.7% cons.), while retail sales also slowed to 13.1% y/y (13.5% cons.). Overall risk appetite was fairly stable however, with most Asian equities trading in the black at the time of writing. The BoJ meeting offered few developments, as the committee left, the APP unchanged, broadly in line with expectations. Yesterday’s newsflow was generally skewed to the negative side as S&P lowering Greece’s outlook to negative, Spain revising budget deficit targets and a 0.9% drop in Germany’s June industrial production all weighed on the euro Wednesday. Once again the chief beneficiaries were the Norwegian krone and Swedish krona, with EURNOK and EURSEK down 1.0% and 0.8%, respectively during New York trading hours on little domestic newsflow. Both crosses continue to push lower regardless of the wider risk environment, a trend which is likely to keep them trading heavy. Sterling gained on the back
of the BoE’s quarterly Inflation Report. The report was dovish as expected – GDP forecasts were revised downward, CPI forecast little changed at 1.7% in the crucial 2-3 year horizon – but it was Governor King’s suggestion that further monetary stimulus was more likely to be in the form of additional QE, rather than a rate cut, that sent the pound stronger against both the dollar and euro. We do not expect BoE action before November, i.e., until it gets a chance to assess the impact of Funding for Lending Scheme and the current QE programme. Ratings downgrades continued: Fitch downgraded Slovenia to A- (negative); DBRS cut Spain’s rating by two levels, Italy’s by one level, and assigned a negative outlook to Ireland. Fitch affirmed Germany at AAA with a stable outlook.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank