Dollar remains broadly range bound after mixed US retail sales data. Today’s focus is on the sell-off in Sterling, particularly against the Swiss Franc and Euro. The yen weakens slightly after yesterday’s rally quickly lost momentum. Commodity currencies are trading on the soft side. Elsewhere, major European indices are mixed while US futures remain almost flat. Gold is pushing back down to key support level around 1680. WTI Crude is range bound.
Technically, the GBP/CHF is breaking the pandemic low at 1.1107 this week and is accelerating slightly. Next target is 200% forecast 1.3070 to 1.2134 from 1.2598 at 1.0726. The question is whether the EUR/CHF would break below the 0.9550 low if the downtrend resumes. Or EURGBP would finally break the 0.8721 resistance to resume the rally from 0.8201.
In Europe, the FTSE is up 0.30% at the time of writing. The DAX fell by -0.17%. CAC is down -0.64%. Germany’s 10-year yield is down -0.007 to 1.709. Previously, the Nikkei was up 0.21% in Asia. The Hong Kong HSI rose 0.44%. China Shanghai SSE fell -1.16%. The Singapore Strait Times rose 0.31%. The 10-year Japanese JGB yield fell -0.0008 to 0.257.
US retail sales in August rose 0.3%m/m, non-auto sales fell -0.3%m/m
US retail sales rose 0.3% mom to $683.3 billion in August, beating expectations of 0.0% mom. Ex-auto sales declined -0.3%mom, below expectations of 0.0%mom. Ex-gasoline sales rose 0.8% mom. Ex-car, ex-gasoline sales rose 0.3% mom.
Compared to the previous year, total sales increased by 9.1% year-on-year. Total sales from June to August increased by 9.3% compared to the same period last year.
US initial jobless claims fell to 213,000
US initial jobless claims fell -5k to 213k for the week ended September 10th, below expectations of 227k. The four-week moving average of initial claims fell -8k to 224k. Ongoing claims increased by 2,000 to 1,403,000 in the week ended September 3rd.
The import price index, which was also published, fell in August by -1.0% compared to the previous month. The Empire State Manufacturing Index improved to -1.5 from -31.3. The Philly Fed survey fell to -9.9 from 6.2.
ECB de Guindos: Firm action is essential to anchor inflation expectations
ECB Vice-President Luis de Guindos said in a speech: “Monetary policy must focus on price stability and achieving our inflation target over the medium term. Decisive action is essential to anchor inflation expectations, which in itself helps to ensure price stability and avoid second-round effects in inflation. Central banks’ most important asset is their credibility, and this asset becomes even more important in times of high uncertainty.”
Speaking on the economy, de Guindos said: “A period of heightened uncertainty will continue for a while, making decision-making more complex. Output growth is decelerating significantly and is expected to stagnate towards the end of the year and remain low at less than 1% next year while downside risks have increased. This is offset by a deteriorating inflation outlook, with record inflation rates expected to remain elevated and well above our target, with risks mainly on the upside.”
Euro-zone exports rose 13.3% yoy in July, while imports rose 44.0% yoy
Euro-zone goods exports rose 13.3% yoy to EUR 235.5 billion in July. Imports rose 44.0% year-on-year to EUR 269.5 billion. The trade deficit with the rest of the world was -EUR 34 billion. Trade within the euro zone increased by 24.0% year-on-year to EUR 224.8 billion.
Seasonally adjusted, eurozone exports fell by -1.7% month-on-month to EUR 236.7 billion. Imports increased month-on-month by 1.5% to EUR 277.0 billion. The trade deficit widened to EUR -40.3bn, larger than the expectation of EUR -32.5bn. Trade within the eurozone increased to EUR 229.3bn from EUR 225.1bn.
Japan reports record monthly trade deficit amid record rise in imports
Japanese exports rose 22.1% yoy to JPY8,062 billion in August, boosted by shipments of auto and chip-related devices. Imports rose 49.9% year-on-year to JPY10.879 billion. This is the largest increase in value since records began in 1979, when data became available. The increase was driven by higher energy prices, including crude oil, coal and LNG.
The trade deficit was -JPY2817 billion. That’s the largest monthly trade deficit on record. This is also the 13th consecutive month of YoY trading shortfalls.
Seasonally adjusted exports fell -0.7% mom to JPY8,379 billion. Imports rose 1.5% to JPY10750 billion. The trade deficit was -JPY2371 billion.
Australia employment rose 33.5k in August, unemployment rate rose to 3.5%
Australia employment rose 33.5k in August, slightly less than expected from 35.5k. Full-time jobs increased by 58.8 000, while part-time jobs decreased by -25.3 000.
The unemployment rate rose to 3.5% from 3.4%, beating expectations of 3.4%. The participation rate increased by 0.2% from 66.4% to 66.6%. Monthly hours worked increased by 0.8% month-on-month.
New Zealand’s GDP grew 1.7% qoq in the second quarter, driven by services
New Zealand’s GDP grew 1.7% qoq in the second quarter, beating expectations of 1.0% qoq after posting a -0.2% qoq contraction in the first quarter. Service industries rose 2.7%, but manufacturing industries fell -3.8%. Basic industry rose by 0.2%.
“The reopening of borders, the easing of both domestic and international travel restrictions and less domestic restrictions under the orange traffic light setting supported growth in industries hardest hit by the COVID-19 response measures,” National Accounts – Industry and Manufacturing Heads said manager Ruvani Ratnayake.
“In the June quarter of 2022, households and international visitors spent more on transportation, accommodation, dining out, and sports and leisure activities.”
USD/JPY Midday Outlook
Daily Pivots: (S1) 142.17; (P) 143.56; (R1) 144.57; More…
Range trading continues in USD/JPY and the intraday bias remains neutral for now. While a deeper pullback cannot be ruled out, the downside should be contained by 139.37 resistance turned support. On the upside, break of 144.98 will continue major uptrend towards 147.68 long-term resistance. Break there will next target a 161.8% projection from 126.35 to 139.37 from 130.38 to 151.44.
Overall uptrend from 101.18 is still ongoing as part of overall uptrend from 75.56 (2011 low). Expect further rise to 147.68 (1998 high). For now, a break of 130.38 support is needed to be the first hint of a medium-term breach. Otherwise, even in the event of a deep pullback, the outlook remains bullish.
Update of economic indicators
|Greenwich Mean Time||Ccy||events||Indeed||forecast||previous||Revised|
|10:45 p.m||CHF||GDP Q/Q Q2||1.70%||1.00%||-0.20%|
|11:50 p.m||JPY||Trade Balance (JPY) 8 Aug||-2.37T||-2.08T||-2.13T||-2.16T|
|01:00||EUR||Consumer Inflation Expectations Sept||5.40%||5.90%|
|01:30||EUR||Change of job Aug||33.5K||35.5K||-40.9K|
|01:30||EUR||Unemployment Rate Aug||3.50%||3.40%||3.40%|
|04:30||JPY||Service Index M/M Jul||-0.60%||-0.10%||-0.20%|
|09:00||EUR||Eurozone trade balance (EUR) 07.07||-32.5B||-30.8B|
|12:30 p.m||USD||Initial Jobless Claims (September 9)||227K||222K|
|12:30 p.m||USD||Retail M/M Aug||0.00%||0.00%|
|12:30 p.m||USD||Retail sales ex cars M/M Aug||0.00%||0.40%|
|12:30 p.m||USD||Import Price Index M/M Aug||-1.20%||-1.40%|
|12:30 p.m||USD||Empire State Manufacturing Index Sept||-15.25||-31.3|
|12:30 p.m||USD||Philadelphia Fed Manufacturing Survey Sept||2.5||6.2|
|13:15||USD||Industrial Production M/M Aug||0.20%||0.60%|
|14:00||USD||Business Inventory July||0.80%||1.40%|
|14:30||USD||natural gas storage||71B||54B|