– NZD leads modest rally vs USD, Asian equities mixed
– Bernanke kept to Jackson Hole speech
– Obama announced a bigger than expected $447bn jobs stimulus plan
– Greece to announce participation rate for the debt exchange
– G7 finance ministers meet for two-day summit
– Conference Calls: Crunch Time – Outlook for the FX Market
What to watch for today
Finance ministers from G7 countries will meet today for a two-day summit in Marseilles. Several officials have called for coordinated action by the G7 to stimulate global economic momentum. The nature of the proposed measures has varied significantly amongst officials, suggesting that the likelihood of a major agreement is low. BoJ Governor Shirakawa has publicly spoken in favor of joint G7 intervention to prevent excessive JPY strength. Following the SNB’s unilateral decision to set a floor for EURCHF at 1.20, we expect the BoJ’s proposal to be met with resistance by other countries. The summit will not produce a communiqué, but a press conference will be hosted at 20:00 GMT.
EUR: Private sector involvement (PSI) check. Today, European regulated financial entities will report their holdings of Greek bonds by 15:00 GMT, with an indication of whether they intend to participate in the voluntary debt exchange program. The Greek government will be able to proceed with the transaction only if at least 90% of the eligible GGBs are tendered. A participation level below 90% would likely be negative for the EUR, as it would create strong uncertainty. See our European rates and emerging markets strategists’ report for more details on the PSI. PSI in Greek PSI – Evaluating the options.
CAD: Steady employment. The August employment report is likely to show that the Canadian economy added 15K jobs in the month of August, according to our economists. We expect the unemployment rate to tick higher from 7.2% to 7.3%. Market consensus is set for a slightly firmer 21k reading, with no change in the unemployment rate. If in line with our estimates, the data would be in line with the BoC’s shift to a neutral policy stance and with its fairly benign growth expectations.
The USD consolidated against G10 and EM currencies, while Asian equities are mixed. A bigger than expected stimulus plan by US President Obama seems to have supported risk appetite after Fed Chairman Bernanke underwhelmed markets and failed to go beyond his Jackson Hole speech. The NZD is outperforming amongst the majors with AUDNZD lower to 1.271. EURUSD bounced modestly from the low in late NY trading to around 1.392 while USDJPY is flat around 77.5. Asian currencies are mixed, with USDKRW down slightly to 1,074 while USDIDR is up modestly to 8,572. Asian equities are mixed with the Nikkei down 0.5% while Chinese stocks are flat.
USD: Obama pushing for larger stimulus. US President Obama announced a bigger than expected $447bn jobs stimulus plan. The largest chunk of his plans is an extension of the payroll tax holiday, with the size of the tax cut increasing to 3.1% from the current 2%. Other plans include a one-year extension of emergency unemployment benefits and a cut in the employer side of payroll taxes. The president stated that he will release a deficit reduction plan in the next two weeks which would to pay for these measures over a 10-year horizon. The WSJ reported that the payroll-tax and unemployment-insurance provisions would be equivalent to about 1% of gross domestic product. The proposals will still have to be passed by the Congress.
CNY: Stubborn inflation. CPI inflation remains elevated at 6.2%yoy, in line with the consensus forecast. The peaking in year-on-year inflation and the recent run of weak global growth data may lead Chinese policy makers to turn slightly more cautious and slow the pace of CNY appreciation. But, with inflation still elevated and way above the policy target, the trend CNY appreciation stance remains intact, in our view. China will also be reporting industrial output, retail sales, fixed assets investment and PPI data later today. We expect the growth data to be resilient and point to a slowdown rather than a hard landing.
IDR: FX inflows expected to increase. The news wires reported that Indonesia’s central bank (BI) says it plans to issue a regulation requiring exporters to repatriate funds back to Indonesia. The resulting inflows would be constructive for the IDR. Importantly, it also suggests that BI is not overly concerned with inflows into IDR at the moment and that it will continue to allow modest IDR appreciation.
MYR: Very weak industrial output growth. Industrial production fell 0.6%yoy in July, vs the consensus forecast for a 2.4%yoy gain. The weakness in the export and manufacturing sectors is biasing growth lower. BNM continued to sound concerned at its policy meeting yesterday and pointed to the increased uncertainties on the global and domestic economic growth prospects having a moderating impact on inflation. We see BNM maintaining policy rates unchanged through 2012 and for the MYR to trade in a range around current levels.
What to read today
– USD: In the latest US Interest Rates Strategy Weekly, our rates strategists argue that the Fed’s treasury purchases will remain focused within 10 years to maturity even when it engage in “Operation Twist”. They have also updated Corporates and the 7-10 year Treasury sector modestly in their recommendations while reducing the front end of the Treasury curve. They believe corporate fundamentals remain strong, and even if they should underperform in a risk asset selloff, they will likely continue to add to their corporate overweight on dips. See report here.
EUR: New approach. Our global strategists argued in their latest report that there has been a new plan to counter the threat of contagion to Spain and Italy. The new approach includes: 1) getting tough with the Greeks; 2) laying the groundwork for fuller fiscal union; and 3) relying on the ECB, not an expanded EFSF, to provide conditional support to Italy and Spain. They note that, in the short run, this new approach is likely to be stabilizing, but it is clear that there are longer-term risks also. See report here.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/document-804424140.pdf
Credit Suisse
FIXED INCOME RESEARCH & ANALYTICS
– Bernanke kept to Jackson Hole speech
– Obama announced a bigger than expected $447bn jobs stimulus plan
– Greece to announce participation rate for the debt exchange
– G7 finance ministers meet for two-day summit
– Conference Calls: Crunch Time – Outlook for the FX Market
What to watch for today
Finance ministers from G7 countries will meet today for a two-day summit in Marseilles. Several officials have called for coordinated action by the G7 to stimulate global economic momentum. The nature of the proposed measures has varied significantly amongst officials, suggesting that the likelihood of a major agreement is low. BoJ Governor Shirakawa has publicly spoken in favor of joint G7 intervention to prevent excessive JPY strength. Following the SNB’s unilateral decision to set a floor for EURCHF at 1.20, we expect the BoJ’s proposal to be met with resistance by other countries. The summit will not produce a communiqué, but a press conference will be hosted at 20:00 GMT.
EUR: Private sector involvement (PSI) check. Today, European regulated financial entities will report their holdings of Greek bonds by 15:00 GMT, with an indication of whether they intend to participate in the voluntary debt exchange program. The Greek government will be able to proceed with the transaction only if at least 90% of the eligible GGBs are tendered. A participation level below 90% would likely be negative for the EUR, as it would create strong uncertainty. See our European rates and emerging markets strategists’ report for more details on the PSI. PSI in Greek PSI – Evaluating the options.
CAD: Steady employment. The August employment report is likely to show that the Canadian economy added 15K jobs in the month of August, according to our economists. We expect the unemployment rate to tick higher from 7.2% to 7.3%. Market consensus is set for a slightly firmer 21k reading, with no change in the unemployment rate. If in line with our estimates, the data would be in line with the BoC’s shift to a neutral policy stance and with its fairly benign growth expectations.
The USD consolidated against G10 and EM currencies, while Asian equities are mixed. A bigger than expected stimulus plan by US President Obama seems to have supported risk appetite after Fed Chairman Bernanke underwhelmed markets and failed to go beyond his Jackson Hole speech. The NZD is outperforming amongst the majors with AUDNZD lower to 1.271. EURUSD bounced modestly from the low in late NY trading to around 1.392 while USDJPY is flat around 77.5. Asian currencies are mixed, with USDKRW down slightly to 1,074 while USDIDR is up modestly to 8,572. Asian equities are mixed with the Nikkei down 0.5% while Chinese stocks are flat.
USD: Obama pushing for larger stimulus. US President Obama announced a bigger than expected $447bn jobs stimulus plan. The largest chunk of his plans is an extension of the payroll tax holiday, with the size of the tax cut increasing to 3.1% from the current 2%. Other plans include a one-year extension of emergency unemployment benefits and a cut in the employer side of payroll taxes. The president stated that he will release a deficit reduction plan in the next two weeks which would to pay for these measures over a 10-year horizon. The WSJ reported that the payroll-tax and unemployment-insurance provisions would be equivalent to about 1% of gross domestic product. The proposals will still have to be passed by the Congress.
CNY: Stubborn inflation. CPI inflation remains elevated at 6.2%yoy, in line with the consensus forecast. The peaking in year-on-year inflation and the recent run of weak global growth data may lead Chinese policy makers to turn slightly more cautious and slow the pace of CNY appreciation. But, with inflation still elevated and way above the policy target, the trend CNY appreciation stance remains intact, in our view. China will also be reporting industrial output, retail sales, fixed assets investment and PPI data later today. We expect the growth data to be resilient and point to a slowdown rather than a hard landing.
IDR: FX inflows expected to increase. The news wires reported that Indonesia’s central bank (BI) says it plans to issue a regulation requiring exporters to repatriate funds back to Indonesia. The resulting inflows would be constructive for the IDR. Importantly, it also suggests that BI is not overly concerned with inflows into IDR at the moment and that it will continue to allow modest IDR appreciation.
MYR: Very weak industrial output growth. Industrial production fell 0.6%yoy in July, vs the consensus forecast for a 2.4%yoy gain. The weakness in the export and manufacturing sectors is biasing growth lower. BNM continued to sound concerned at its policy meeting yesterday and pointed to the increased uncertainties on the global and domestic economic growth prospects having a moderating impact on inflation. We see BNM maintaining policy rates unchanged through 2012 and for the MYR to trade in a range around current levels.
Upcoming Credit Suisse Client Conference Calls
Crunch Time – Outlook for the FX Market
Friday, 9 September – 9:00am EDT / 2:00pm BST
Ray Farris, Head of FX Strategy and Chief Strategist for Asia-Pacific Fixed Income, will be hosting a call to discuss the September FX Monthly
Dial-in numbers:
Conference Call ID: 98868301
International: +44 (0) 1452 568 442
USA Free Call: 1 866 383 7080
Please see the conference call flyer for additional dial-ins and replay information.
The Future of the Euro: Q&A Session Conference Call About the Continuing Fears of EMU Breakup
Monday, 12 September – 11:00am EDT / 4:00pm BST
This Q&A style call will feature a discussion around the continuing fears of EMU breakup. There will be no prepared remarks; please submit questions for the Q&A by clicking here before 9am BST on Monday, September 12.
Participants:
William Porter, Head of European Credit Strategy
Neville Hill, European Economics
Giovanni Zanni, European Economics
Ray Farris, Head of FX Strategy and Chief Strategist for Asia-Pacific Fixed Income
Andrew Garthwaite, Head of Global Equity Strategy
Dial-in numbers:
Conference Call ID: 98904158
UK Standard International: +44 (0) 1452 568 442
USA Free Call: 1 866 383 7080
Please see the conference call flyer for additional dial-ins and replay information.
What to read today
– USD: In the latest US Interest Rates Strategy Weekly, our rates strategists argue that the Fed’s treasury purchases will remain focused within 10 years to maturity even when it engage in “Operation Twist”. They have also updated Corporates and the 7-10 year Treasury sector modestly in their recommendations while reducing the front end of the Treasury curve. They believe corporate fundamentals remain strong, and even if they should underperform in a risk asset selloff, they will likely continue to add to their corporate overweight on dips. See report here.
EUR: New approach. Our global strategists argued in their latest report that there has been a new plan to counter the threat of contagion to Spain and Italy. The new approach includes: 1) getting tough with the Greeks; 2) laying the groundwork for fuller fiscal union; and 3) relying on the ECB, not an expanded EFSF, to provide conditional support to Italy and Spain. They note that, in the short run, this new approach is likely to be stabilizing, but it is clear that there are longer-term risks also. See report here.