Once again Asia consolidated the overnight currency moves, only this time to the downside.
The EUR drifted lower overnight as EU data failed to inspire, and Asia kept risk currencies in tight ranges at lower levels than yesterday. There was not much on the data front to push direction but a broader “risk-off” sentiment dominated, notably across the region’s equity indices, and this lent a heavy air to related risk currencies.
Asia also focused on an FT report saying that Greece was considering requesting for a 2-year extension to fulfill its austerity programme as it struggles to find another €11.5 bln worth of spending cuts. This kept the EUR capped (though in a 10 point EURUSD range that was not difficult!).
On the data front, Australia’s latest consumer confidence reading from Westpac was disappointing as a 2.5 percent decline from July negated most of the previous month’s gains. The indicator is back to where it was in July 2011. AUDUSD slid a couple of spreads but was well contained in the range.
Wage growth in Australia increased at a faster pace than in the first quarter with a 1.0 percent q/q and 3.7 percent y/y print. Despite the slightly firmer data, wage costs are running close to their medium-term average and are still contained within the RBA’s perceived limit of 4.5 percent.
Yesterday, German GDP data was a disappointment compared with forecasts, Eurozone growth matched forecasts (though a low -0.2 percent q/q, -0.4 percent y/y) and ZEW surveys were mixed, with the German reading -25.5 from -19.6 but Euro-zone -21.2 from -22.3. This set the tone for a mildly lower EUR. while the USD received a boost late in the session after better US data added to the pressure in EURUSD. GBP attempted to push higher following firmer inflation data. but the follow through failed as the US dollar gathered momentum.
The US data mentioned above saw producer prices edging higher, rising 0.3 percent m/m, 0.5 percent y/y while advance retail sales were a robust +0.8 percent versus 0.3 percent expected and a revised 0.7 percent decline the previous month. Caution in the broader economy was evident, with the IBD/TIPP economic optimism index sliding back to 45.6 in August from 47.0 in July. Another mixed, non-descript, low-volume day was seen on Wall Street, with the DJIA closing up 0.02 percent, the S&P down 0.01 percent and the Nasdaq -0.18 percent.
Data Highlights
US Jul. NFIB Small Business Optimism out at 91.2 vs. 91.6 expected and 91.4 prior
US Jul. PPI out at +0.3% m/m, +0.5% y/y vs. 0.2%/0.5% expected and 0.1%/0.7% prior resp.
US Jul. Advance Retail Sales out at +0.8% m/m vs. 0.3% expected and revised -0.7% prior
US Jul. Retail Sales Ex-Auto/Gas out at +0.9% m/m vs. 0.5% expected and revised -0.4% prior
US Aug. IBD/TIPP Economic Optimism out at 45.6 vs. 46.9 expected and 47.0 prior
US Jun. Business Inventories out at +0.1% vs. 0.2% expected and 0.3% prior
AU Aug. Westpac Consumer Confidence out at -2.5% vs. +3.7% prior
AU Q2 Wage Cost Index out at +1.0% q/q, +3.7% y/y vs. 0.9%/3.5% expected and 0.9%/3.5% prior resp.
Upcoming Economic Calendar Highlights
(All Times GMT)
SI Retail Sales (0500)
Norway Trade Balance (0800)
UK BOE Minutes (0830)
UK Claimant Count Rate (0830)
UK ILO Unemployment Rate (0830)
US MBA Mortgage Applications (1100)
US CPI (1230)
US Empire Manufacturing (1230)
US TIC Flows (1300)
US Industrial Production (1315)
US Capacity Utilization (1315)
US NAHB Housing Market Index (1400)
Andrew Robinson,
SAXO BANK