On Monday, at 04:30 GMT, Japan will announce a change in industrial production for June. At 12:30 GMT, Canada will report changes in the volume of transactions with foreign securities for June. At 12: 30 GMT, the US will publish the NY Fed Empire State manufacturing index for August. The Eurogroup will also meet on Monday. At 14:00 GMT, the US will present the NAHB housing market index for August. At 20: 00 GMT, the US will announce changes in the net and total volume of purchases of long-term US securities by foreign investors for June
On Tuesday, at 01:30 GMT in Australia, the minutes of the RBA's monetary policy meeting will be released. At 12:30 GMT, the United States will report changes in construction permits and the housing starts for July. At 22:45 GMT, New Zealand will present the producer price index for the 2nd quarter. At 23:50 GMT, Japan will announce changes in the volume of orders for machinery and equipment and the foreign trade balance for July.
On Wednesday, at 00:30 GMT, Australia will release leading index for July. At 06:00 GMT, Britain will publish the consumer price index, retail price index, producer purchasing price index and producer selling price index for July. At 08: 00 GMT, the Euro zone will report changes in the ECB's balance of payments for June. At 09:00 GMT, the Euro zone will present the consumer price index for July. Also on Wednesday, the OPEC+ Ministerial monitoring Committee (JMMC) will meet. At 12:30 GMT, Canada will release the consumer price index for July. Also at 12:30 GMT, Canada will announce changes in wholesale trade volume for June. At 14:30 GMT, the US will report changes in oil reserves according to the Ministry of energy. At 18:00 GMT in the US, FOMC meeting minutes will be published.
On Thursday, at 06:00 GMT, Germany will release the producer price index for July. Also at 06:00 GMT, Switzerland will announce a change in the foreign trade balance for July. At 10:00 GMT, Britain will publish the balance of industrial orders according to the Confederation of British Industrialists for August. At 11:30 GMT in the Euro area, the ECB monetary policy meeting accounts will be released. At 12: 30 GMT, the US will announce changes in the number of initial applications for unemployment benefits and release the Philly Fed manufacturing index for August. At 14:00 GMT, the US will publish an index of leading indicators for July. At 23:30 GMT, Japan will release the consumer price index for July.
On Friday, at 00:30 GMT, Japan will present the manufacturing PMI and the service sector PMI for August. At 06:00 GMT, Britain will report changes in retail sales for July and net public sector borrowing for July. Then the focus will be on business activity indices in the manufacturing sector and services for August: at 07:15 GMT, France will report, at 07:30 GMT - Germany, at 08: 00 GMT - the Eurozone, and at 08:30 GMT - Britain. At 12:30 GMT, Canada will report changes in retail sales for June. At 13: 45 GMT, the US will publish the index of business activity in the manufacturing sector and the PMI for the services sector for August. At 14:00 GMT, the Euro zone will release a consumer confidence indicator for August. Also at 14: 00 GMT, the US will announce changes in housing sales in the secondary market for July. At 17:00 GMT in the US, the Baker Hughes report on the number of active oil drilling rigs will be released.
On Sunday, at 22:45 GMT, New Zealand will report changes in retail sales for the 2nd quarter.
James Knightley, Chief International Economist at ING, notes that the U.S. industrial production came in exactly in line with market expectations, rising 3% month-on-month.
"Manufacturing was up 3.4%, led by autos (+28.3%) with ex-autos posting a 1.6% gain. Utilities rose 3.3% as hotter than usual weather led to more electricity demand with AC units staying on longer and working harder. Rounding out the details, mining rose 0.8% although oil and gas drilling fell another 8% to leave that component 71.5% down YoY."
"Overall it is a decent outcome, but we caution that manufacturing output is still more than 8% lower than the most recent high in December."
"The scope for further large gains on factory re-opening appears limited so additional gains will be determined much more by underlying economic fundamentals. Based on the high-frequency consumer sector data there is evidence of a plateauing in the recovery and it will be hard for the manufacturing sector to buck that trend."
"In any case with capacity utilisation at relatively low levels (70.6% versus an average of 78% through 2019) corporate profitability remains under pressure which will constrain business appetite for investment and creating jobs."
Canada released its Monthly Survey of Manufacturing on Friday, which showed
that the Canadian manufacturing sales surged 20.7 percent m-o-m in June to CAD48.74
billion, following a revised 11.6 percent m-o-m climb in May (originally a 10.7
percent m-o-m gain). This was the largest increase in manufacturing sales on
the survey, sales increased in all 21 industries, led by motor vehicle (+281.6
percent m-o-m) and motor vehicle parts (+190.3 percent m-o-m) industries,
as most plants returned to full
production following shutdowns earlier in the pandemic. Excluding these two
industries, manufacturing sales rose 10.3 percent m-o-m.
Overall, sales of durable goods industries surged 34.1 percent m-o-m in June, while sales of non-durable goods industries rose 8.8 percent m-o-m.
The Commerce Department
announced on Friday that business inventories fell 1.1 percent m-o-m in June,
following an unrevised 2.3 percent m-o-m decline in May.
That was better than economists’ forecast for a 1.2 percent m-o-m decrease.
According to the report, stocks at retailers dropped 2.6 percent m-o-m in June, while those at wholesalers fell 1.4 percent m-o-m. At the same time, inventories at manufacturers rose 0.6 percent m-o-m.
In y-o-y terms, business inventories declined 5.8 percent in June.
A report from
the University of Michigan revealed on Friday the preliminary reading for the
Reuters/Michigan index of consumer sentiment increased 0.4 percent m-o-m to 72.8
in early August.
Economists had expected the index would decrease to 72.0 this month from July’s final reading of 72.5.
According to the report, the index of current U.S. economic conditions dropped 0.4 percent m-o-m to 82.5 in August from 82.8 in the previous month. Meanwhile, the index of consumer expectations rose 0.9 percent m-o-m to 66.5 this month from 65.9 in July.
The report noted: “The policy gridlock has acted to increase uncertainty and heightened the need for precautionary funds to offset lapses in economic relief programs and to hedge against fears about the persistence and spread of the coronavirus as the school year gets underway. Bad economic times are anticipated to persist not only during the year ahead, but the majority of consumers expect no return to a period of uninterrupted growth over the next five years.“
Reserve reported on Friday the U.S. industrial production rose 3.0 m-o-m in July,
following a revised 5.7 percent m-o-m advance in June (originally a 5.4 percent
Economists had forecast industrial production would increase 3.0 percent m-o-m in July.
According to the report, manufacturing output grew 3.4 percent m-o-m in July, as most major industries advanced, with the largest gain registered by motor vehicles and parts (+28.3 percent m-o-m). Meanwhile, the output of utilities rose 3.3 percent m-o-m in July and mining production increased 0.8 percent m-o-m.
Capacity utilization for the industrial sector increased 2.1 percentage points m-o-m to 70.6 percent in July. That was 0.3 percentage points above economists’ forecast but 9.2 percentage points below its long-run (1972-2019) average.
In y-o-y terms, the industrial output fell 8.2 percent in July, following a revised 11.0 percent tumble in the prior month (originally a 10.8 percent drop).
U.S. stock-index futures traded mixed on Friday, as investors assessed the U.S. retail sales data for July, while hopes for additional coronavirus stimulus in the U.S. diminished.
Today's Change, points
Today's Change, %
(company / ticker / price / change ($/%) / volume)
ALTRIA GROUP INC.
Amazon.com Inc., NASDAQ
American Express Co
AMERICAN INTERNATIONAL GROUP
Cisco Systems Inc
Citigroup Inc., NYSE
Deere & Company, NYSE
E. I. du Pont de Nemours and Co
Exxon Mobil Corp
FedEx Corporation, NYSE
Ford Motor Co.
Freeport-McMoRan Copper & Gold Inc., NYSE
General Electric Co
General Motors Company, NYSE
Home Depot Inc
HONEYWELL INTERNATIONAL INC.
International Business Machines Co...
Johnson & Johnson
JPMorgan Chase and Co
Merck & Co Inc
Procter & Gamble Co
Starbucks Corporation, NASDAQ
Tesla Motors, Inc., NASDAQ
The Coca-Cola Co
Travelers Companies Inc
Twitter, Inc., NYSE
UnitedHealth Group Inc
Verizon Communications Inc
Wal-Mart Stores Inc
Walt Disney Co
Yandex N.V., NASDAQ
Tesla (TSLA) upgraded to Neutral from Underperform at BofA Securities; target raised to $1750
Tesla (TSLA) upgraded to Equal-Weight from Underweight at Morgan Stanley; target raised to $1360
data from the U.S. Labour Department showed on Friday that nonfarm business
sector labor productivity in the United States surged 7.3 percent q-o-q in the second
quarter of 2020, as output declined 38.9 percent q-o-q and hours worked fell 43.0
percent q-o-q (seasonally adjusted). This was the
largest quarterly increase since the second quarter of 2009.
This was well above economists’ forecast for a 1.5 percent q-o-q advance after a revised 0.3 percent q-o-q drop in the first quarter (originally a 0.9 percent q-o-q decline).
In y-o-y terms, the labor productivity rose 2.2 percent in the second quarter, reflecting an 11.8-percent decline in output and a 13.7-percent fall in hours worked.
Meanwhile, unit labor costs in the nonfarm business sector in the second quarter jumped 12.2 percent q-o-q compared to a revised 9.8 percent q-o-q climb in the prior quarter (originally a 5.1 percent q-o-q gain). This was the largest increase in this measure since the first quarter of 2014.
Economists had forecast a 6.2 percent surge in second-quarter unit labor costs.
Unit labor costs quarterly increase reflected a 20.4-percent q-o-q surge in hourly compensation and a 7.3-percent advance in productivity.
Compared to the corresponding period of 2019, unit labor costs rose 5.7 percent.
Department announced on Friday the sales at U.S. retailers rose 1.2 percent
m-o-m in July, following a revised 8.4 percent m-o-m gain in June (originally a
7.5 percent m-o-m surge).
Economists had expected total sales would jump 1.9 percent m-o-m in July.
According to the report, sales at electronics and appliance stores surged in July, while those at motor vehicle and parts dealers declined.
Excluding auto, retail sales increased 1.9 percent m-o-m in July after a revised 8.3 percent m-o-m climb in the previous month (originally a 7.3 percent m-o-m surge), better than economists’ forecast of a 1.3 percent m-o-m increase.
In y-o-y terms,
the U.S. retail sales jumped 2.7 percent in July after a revised 2.1 advance in
the previous month (originally a 1.1 percent raise). This was the biggest
increase since February.
|09:00||Eurozone||Employment Change||Quarter II||-0.2%||-1.7%||-2.8%|
|09:00||Eurozone||Trade balance unadjusted||June||9.4||12.6||21.2|
|09:00||Eurozone||GDP (QoQ)||Quarter II||-3.6%||-12.1%||-12.1%|
|09:00||Eurozone||GDP (YoY)||Quarter II||-3.1%||-15%||-15%|
Safe-haven JPY rose against most other major currencies in the European session on Friday as investor risk appetite waned amid growing concern for a coronavirus resurgence and the diminishing chances of a coronavirus stimulus bill in the U.S.
Coronavirus cases are rising in some parts of the world, reigniting concerns about the possibility of the second wave of Covid-19. On this backdrop, the UK's government decided to impose quarantine on tourists returning from holidays from France, the Netherlands and Malta.
U.S. Congress adjourned for a month-long vacation, dismaying investors' hopes for a breakthrough on a fresh stimulus package. House Speaker Nancy Pelosi said on Thursday that Democrats and the White House remain "miles apart" in talks on a fresh round of stimulus.
Weaker-than-expected July retail sales and industrial production data from China added to the cautious tone as well. Now, market participants are awaiting the U.S. retail sales data and the University of Michigan's monthly survey of consumers, due at 12:30 GMT and 14:00 GMT respectively.
FXStreet notes that the S&P 500 rally is losing momentum at the 3394 record high. With a daily RSI momentum divergence now in place, the risk for a correction lower is growing steadily, according to the Credit Suisse analyst team.
“With daily RSI momentum now holding a small bearish RSI divergence and with the market above what we see as its ‘typical’ extreme (10% above its 200-day average, currently at 3370) the risk for a correction lower continues to grow.”
“Support at 3355 needs to hold to avoid this to keep the immediate risk higher for a challenge on the 3394 record high. Beyond here can see an overshoot to potential trend resistance, today seen at 3415, which we would look to cap at first.”
“Below 3355 can further increase the risk for a correction lower for a move back to the recent low and 13-day average at 3326/17. Only a close below here though would suggest a correction lower is finally underway, with support then seen next at 3271.”
Baidu (BIDU) reported Q2 FY 2020 earnings of RMB14.73 per share (versus RMB1.47 per share in Q2 FY 2019), beating analysts’ consensus estimate of RMB9.87 per share.
The company’s quarterly revenues amounted to RMB26.034 bln (-1.1% y/y), roughly in line with analysts’ consensus estimate of RMB25.790 bln.
The company also issued in-line guidance for Q3 FY 2020, projecting revenues of RMB26.30-28.70 bln versus analysts’ consensus estimate of RMB 27.68 bln.
BIDU fell to $117.30 (-5.84%) in pre-market trading.
FXStreet notes that community transmission of COVID-19 has re-emerged in New Zealand. The Government has responded by raising the COVID Alert Level for Auckland to 3, while the rest of New Zealand is at Level 2. Nobody knows how this is going to play out, so economists at Westpac discuss the economic implications of three possible outcomes.
“If the Alert Levels are not raised further, and things return to normal within a couple of weeks, the economic impact will be relatively small. for each week that Auckland is at Level 3 and the rest of New Zealand at Level 2, about $300m of economic activity is foregone. This equates to 0.5% of quarterly GDP. But, during a brief lockdown, a higher proportion of that lost activity would be recouped shortly afterwards, so the actual lasting economic damage would be significantly smaller than this $300m figure. We would continue to forecast an increase in the unemployment rate from today’s 4% to a peak of 7%.”
“ If there was another lockdown, there would obviously be another period of curtailed activity, so the September quarter would look similar to June. We estimate that this time, economic activity would rebound very quickly to around 5.5% below our pre-COVID forecast. Our unemployment forecast would peak at about 8% in this alternative scenario, compared to a peak of 7% in our current forecasts.”
“If New Zealand loses control of the virus, that would be a game-changer for the economy. If New Zealand goes into another successful lockdown, it will suffer only incremental additional economic damage, whereas if the virus gets out of control the economy would take a much bigger hit.”
Applied Materials (AMAT) reported Q3 FY 2020 earnings of $1.06 per share (versus $0.74 per share in Q3 FY 2019), beating analysts’ consensus estimate of $0.95 per share.
The company’s quarterly revenues amounted to $4.395 bln (+23.4% y/y), beating analysts’ consensus estimate of $4.169 bln.
The company also issued upside guidance for Q4 FY 2020, projecting EPS of $1.11-1.23 versus analysts’ consensus estimate of $1.02 and revenues of $4.40-4.80 bln versus analysts’ consensus estimate of $4.35 bln.
AMAT rose to $67.04 (+3.03%) in pre-market trading.
FXStreet reports that according to analysts at Credit Suisse, EUR/USD maintains a bullish “reversal day” after holding key price support at 1.1697 and although the threat of a top can still not be ruled out, the immediate bias stays seen higher for a retest on the top of the range at 1.1916/26.
“Whilst the threat of a top can still not be ignored, at the present, it remains more likely we are seeing a high-level consolidation phase prior to the core uptrend eventually resuming.”
“Whilst support at 1.1781 holds the immediate risk should stay higher in the range with resistance seen at 1.1865 initially, then more importantly at the recent highs and downward sloping trendline/“neckline” from its early 2018 top at 1.1916/26. An eventual move above here should reassert the core uptrend with resistance seen next at 1.1997 and then our 1.2145/55 next major resistance.”
“Below 1.1781 would warn of further range trading with support seen at 1.1755 next, below which can see a move back to 1.1710. Only below 1.1697 would see a top established to warn of a more concerted setback with support then seen initially at 1.1630/22 – the 38.2% retracement of the rally from late June.”
FXStreet reports that economists at Charles Charles Schwab think that the dollar is in for a prolonged decline for the following reasons: the Federal Reserve has shifted to a zero-rate policy, US growth is likely will underperform other major economies due to the coronavirus, political uncertainty has risen and increasing US budget deficits will need to be financed with foreign capital.
“The Fed’s policymaking arm, the Federal Open Market Committee, has indicated it will hold interest rates near zero for the foreseeable future, with Fed Chair Jerome Powell reinforcing that sentiment when he said members were ‘not even thinking about thinking about raising interest rates.’ Combined with concerns that the US will trail other major economies coming out of the COVID-19 crisis, this has caused the 10-year Treasury yield to decline and converge with other major developed-country interest rates, which makes the US dollar less attractive to foreign investors searching for yield.”
“It’s actually the spread of international real interest rates (yields adjusted for inflation) that is a significant factor affecting currency fluctuations. And while nominal interest rates, such as the 10-year Treasury yield, have fallen to record lows, real interest rates have fallen even further into negative territory. One reason for this is an increase in inflation expectations, fueled by the Fed’s intention to let consumer prices overshoot its 2% longer-term target, massive monetary stimulus, and the risk of a feedback cycle of a weaker dollar (which can result in higher import prices).”
“Fiscal stimulus spending is resulting in growing US budget deficits that will need foreign financing to fill. With interest rates held down by the Fed and weak growth expectations, a lower dollar will likely be required to entice international investors to buy.”
“While the dollar is likely to remain the primary reserve currency, heightened political uncertainty in the US could make other countries look relatively stable, barring a renewed crisis.”
“We expect the US dollar to decline over the intermediate-term – but investor sentiment on the dollar has become much too dour, in our view, which raises the possibility of a short-term bounce.”
FXStreet reports that NZD/USD is the choice pair for anyone who wants to play for a USD rebound with the market now pressuring key short-term support at 0.6525/00. Whilst economists at Credit Suisse ideally look for this level to hold, the ‘wedge measured objective’ is at 0.6400. Bigger picture, weakness is still seen as corrective and the broader uptrend is expected to resume.
“As the market is now breaking beneath the 55-day average, we remain biased mildly to the downside in the short-term and would not exclude another test of the back of the broken 2014 downtrend, currently at 0.6500.”
“We ideally look for the 0.65 area to hold and shift into a lengthier consolidation phase, with resistance seen initially at 0.6554, then 0.6599/6000, ahead of a move to the back of the broken March uptrend at 0.6618.”
“Beneath 0.6500 could see weakness extend even further though, with next support seen at 0.6466, ahead of 0.6450/41. It is worth highlighting the ‘wedge measured objective’ is at 0.6400.”
Reuters reports that bullish global investors yanked almost $20 billion out of cash funds over the last week and piled $13.6 billion into bonds, another $8 billion into stock markets and the ninth highest amount on record into inflation-linked U.S. bonds.
BOFA analysts, citing data from financial flow tracking firms such as EPFR, said strong consumer, U.S. housebuilder and China tech and inflation-linked bond moves were all putting upward pressure on bond yields - which is what traditionally ends bull markets.
Their number-crunching showed the 4th largest weekly inflow to municipal bonds at $1.9 billion and $1.2 billion into U.S. inflation-linked TIPS bonds. That, they said, showed “investors discounting Dem (Democratic party) sweep in November,” referring to the upcoming U.S. election.
It was also another large week of investment-grade bond fund inflows at $10.7 billion, a 19th week of inflows into high-yield bonds in the last 20 weeks, while $4.8 billion was shovelled into U.S. equity funds, the largest in nine weeks.
According to the report from Eurostat, in the second quarter of 2020, still marked by COVID-19 containment measures in most Member States, seasonally adjusted GDP decreased by 12.1% in the euro area and by 11.7% in the EU compared with the previous quarter. These were by far the sharpest declines observed since time series started in 1995. In the first quarter of 2020, GDP had decreased by 3.6% in the euro area and by 3.2% in the EU.
Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 15.0% in the euro area and by 14.1% in the EU in the second quarter of 2020, after -3.1% and -2.5% respectively in the previous quarter. These were also by far the sharpest declines since time series started in 1995.
The number of employed persons decreased by 2.8% in the euro area and by 2.6% in the EU in the second quarter of 2020, compared with the previous quarter. These were the sharpest declines observed since time series started in 1995. In the first quarter of 2020, employment had decreased by 0.2% in the euro area and by 0.1% in the EU.
Compared with the same quarter of the previous year, employment decreased by 2.9% in the euro area and by 2.7% the EU in the second quarter of 2020, after +0.4% in both zones in the first quarter of 2020. These were also the sharpest declines observed since time series started in 1995.
FXStreet reports that further downside in USD/CNH is expected in case 6.9300 is cleared in the near-term, noted FX Strategists at UOB Group.
24-hour view: “Our expectation for USD to ‘weaken to 6.9210’ was wrong as it staged a sharp and rapid rebound after touching a low of 6.9280 (overnight high of 6.9530). While the rapid rise has scope to extend higher, any advance is expected to face solid resistance at 6.9600. On the downside, support is at 6.9430 followed by 6.9350.”
Next 1-3 weeks: “On Tuesday (11 Aug, spot at 6.9620), we highlighted that ‘while USD could still weaken further out, for the next 1 to 2 weeks, USD is likely to consolidate and trade sideways within a 6.9300/6.9800 range’. USD is currently holding just above 6.9300 and if there is a NY closing below this relatively strong support level, it would indicate the start of a period of sustained weakness in USD that could lead to a move to 6.9050, possibly even to 6.8850. At this stage, the odds for such a scenario are quite high and only a move back above 6.9700 within these few days would indicate that USD is still trading in a consolidation phase.”
Bloomberg reports that U.S. stocks likely have more upside as they factor in American growth prospects and the Covid-19 vaccine outlook, according to Goldman Sachs Group Inc.
The implied level of the S&P 500 could be above 3,600, strategists Dominic Wilson and Vickie Chang wrote in a note Thursday. That’s if markets move toward Goldman’s “comparatively more optimistic” U.S. growth forecast, and real yields move higher but then further optimism pushes breakeven inflation rates higher without sending nominal yields up significantly, bringing the real yields down, they said. The gauge closed at 3,373.43 on Thursday.
“There is still room for market pricing of U.S. growth views to move higher, particularly given improving prospects for an early vaccine,” the note said. “While a back-up in real yields would be a potential drag on equity returns, as long as it is driven by an upgrade to the market’s cyclical views, the improved cyclical outlook would dominate the effect of rising real yields and drive equities higher.”
The S&P 500 has risen 51% off its March 23 low as governments and central banks pumped liquidity into economies worldwide to mitigate the impact of the coronavirus pandemic. Market strategists including Yardeni Research’s Ed Yardeni and Fundstrat Global Research’s Tom Lee have recently boosted their year-end estimates for the benchmark.
FXStreet reports that EUR/USD is trading above 1.18 yet off the highs. The pair is allowing for consolidation in the short-term, therefore, Commerzbank’s Karen Jones has reduced her short positions. The 1.1646 mark holds the downside while above 1.1915 EUR/USD would look for the 1.2635 200-month ma.
“EUR/USD continues to recover near-term and this has been enough to neutralise the downside corrective state. The best I can say is that the market is holding sideways at the moment and as a consequence we will reduce our short position.”
“Dips are expected to remain well supported by both the 1.1646/36 (a double Fibo) and the three-month uptrend at 1.1546. This trend line is reinforced by the March high at 1.1495.”
“Above 1.1915/20 we will just go with the up move and look for further gains to 1.2635/66, the 200-month ma.”
CNBC reports that China may never catch up to buying the agreed amounts of U.S. goods and services under the “phase one” trade deal, an expert said on Friday.
Both countries signed the agreement in January, which brought to a pause the trade war between them that saw retaliatory tariffs being slapped on goods worth hundreds of billions of dollars. Among other things, China committed to buying, over two years, at least $200 billion more U.S. goods and services in addition to its 2017 purchases.
But China has fallen short so far, noted Scott Kennedy, senior advisor and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies.
“If it’s really based on the genuine commitments that they inked in January, they’re far behind and they’re never gonna catch up,” he told CNBC’s “Squawk Box Asia.”
Data compiled by Peterson Institute for International Economics found that in the first half of 2020, China bought less than a quarter of the targeted full-year amount of U.S. goods under the trade deal. The data doesn’t include U.S. services purchased by China because those are not reported on a monthly basis, said PIIE.
Top trade negotiators from both countries will reportedly meet via video conference this week to review the progress of implementing the phase one agreement.
Kennedy said the U.S.-China dispute has morphed from one about trade imbalances into a “fundamental strategic competition” in which both countries are “portraying the other as an existential threat.”
Still, he said the White House would not want to “junk” the deal because “it’s the only reason the Chinese are buying agricultural goods from farmers in red states that the president needs for reelection.”
eFXdata reports that Goldman Sachs adopts a cautious bias on CAD in the near-term.
"We expect CAD to continue to strengthen as risk rallies, but we are more cautious on the currency outside of it’s high-beta feature for three reasons: (i) the economy is still slowly recovering from the twin virus-oil shock, (ii) housing market vulnerabilities persist, with monetary policy expected to remain highly accommodative for an extended period of time, and (iii) the renewed rise in US-Canada trade tensions may slow any appreciation pressures," GS notes.
"If the reopening process in the US remains bumpier than in Canada, there may be scope for relative growth expectations to shift in CAD’s favor. But as long as the probability of a widely distributed vaccine within the next year continues to rise, investors may look through any US underperformance on virus control, since a vaccine would most likely provide the biggest boost to US growth," GS adds.
|02:00||China||Retail Sales y/y||July||-1.8%||0.1%||-1.1%|
|02:00||China||Industrial Production y/y||July||4.8%||5.1%||4.8%|
|02:00||China||Fixed Asset Investment||July||-3.1%||-1.6%||-1.6%|
|04:30||Japan||Tertiary Industry Index||June||-2.1%||7.9%|
|06:30||Switzerland||Producer & Import Prices, y/y||July||-3.5%||-3.3%|
During today's Asian trading, the US dollar fell modestly against the euro and yen, remaining under pressure due to the lack of progress in the adoption of a new package of measures to support the US economy.
The ICE U.S. Dollar index, which shows the value of the US dollar against six major world currencies, fell 0.08% from the previous day.
The US Senate at the end of the session on Thursday went on vacation until the end of the month, without reaching an agreement. The size of the new economic stimulus package is particularly controversial. US President's economic adviser Larry Kudlow said the Democrats are asking for "too much money."
Meanwhile, the number of Americans who first applied for unemployment benefits fell by 228,000 in the week ending August 8 to 963,000, according to a report from the US labor Department. Thus, the number of applications fell below the 1 million mark for the first time since March - since the beginning of the coronavirus pandemic.
Investors also analyzed data on China. Industrial production in China last month increased by 4.8% compared to July last year, as in June, according to data from the State statistical office. Analysts had forecast growth of 5.1%. Retail sales in China in July unexpectedly fell by 1.1% in annual terms after falling by 1.8% a month earlier. Experts expected an increase of 0.1%.
According to the report from INSEE, in July 2020, the Consumer Price Index (CPI) accelerated by 0.4% over a month, after +0.1% in the previous month. This rise was the result of higher prices for services (+0.9% year on year after +0.3%), a slight increase in tobacco prices (+0.1% after a stability in June) and a stability of manufactured products, after a 0.3% drop in the previous month. Contrariwise, the fall in food prices was higher (−0.9% after −0.8%) and energy prices slowed down to +1.0% after +1.8%.
Seasonally adjusted, consumer prices rose by 0.7% in July, after +0.1% in June.
Year on year, consumer prices accelerated to 0.8%, after +0.2% in the previous month. This rise in inflation came from a sharp year-on-year rebound in manufactured products, linked to the postponed summer sales, and a smaller fall in energy prices. Contrariwise, food prices and, to a lesser extent, services and tobacco prices, slowed down.
Year on year, core inflation rose, in July, to +1.4% after +0.3% in the previous month. The Harmonised Index of Consumer Prices (HICP) increased by 0.4% over a month, after +0.1% in the previous month; year on year, it accelerated to +0.9%, after +0.2% in the previous month.
According to the report from Federal Statistical Office, the Producer and Import Price Index rose in July 2020 by 0.1% compared with the previous month, reaching 98.3 points (December 2015 = 100). The rise is due in particular to higher prices for petroleum products. Compared with July 2019, the price level of the whole range of domestic and imported products fell by 3.3%.
The Producer Price Index registered falling prices compared with the previous month, particularly for scrap. Vegetables and potatoes also became cheaper. In contrast, increasing prices were observed for petroleum products.
Petroleum products were responsible in particular for the increase in the Import Price Index compared with June 2020. Petroleum and natural gas, copper and products made therefrom, as well as other fruit and nuts, also showed price increases. In contrast, computers and peripheral equipment, vegetables, potatoes, basic iron, steel and other fabricated metal products showed lower prices.
FXStreet reports that NZD/USD remains under pressure and could slip back to the 0.6520 region in the near-term, in opinion of FX Strategists at UOB Group.
24-hour view: “Yesterday, we held the view that ‘strong rebound in NZD could extend towards 0.6610’. Our expectation did not materialize as NZD only touched a high of 0.6599 before easing off. Downward momentum has ticked up and for today, NZD could edge lower towards the strong support at 0.6520. A dip below this level is not ruled but the next support at 0.6500 is unlikely to come under threat. Resistance is at 0.6565 followed by 0.6585.”
Next 1-3 weeks: “In our update from Tuesday (11 Aug, spot at 0.6585), we held the view that NZD ‘is expected to trade with a downward bias towards 0.6520’. NZD dipped to a low of 0.6524 yesterday (12 Aug) before rebounding. The underlying tone still appears to be soft and from here, a retest of the 0.6520 level is not ruled. Only a move above 0.6660 would indicate the current mild downward pressure has eased.”
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1819
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 87737 contracts (according to data from August, 13) with the maximum number of contracts with strike price $1,0500 (5007);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.3067
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date September, 4 is 22603 contracts, with the maximum number of contracts with strike price $1,3800 (3396);
- Overall open interest on the PUT options with the expiration date September, 4 is 17194 contracts, with the maximum number of contracts with strike price $1,3000 (1472);
- The ratio of PUT/CALL was 0.76 versus 0.75 from the previous trading day according to data from August, 13
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
RTTNews reports that China's industrial production increased in July, while retail sales logged an unexpected fall, data from the National Bureau of Statistics revealed Friday.
Industrial production grew 4.8 percent on a yearly basis in July, the same rate of growth as seen in June. However, the rate was weaker than the expected rise of 5.1 percent.
At the same time, retail sales dropped 1.1 percent from last year, confounding expectations for an increase of 0.1 percent. Sales had declined 1.8 percent in June.
During January to July period, fixed asset investment decreased 1.6 percent versus a 3.1 percent decrease in January to June. The rate came in line with expectations.
|Raw materials||Closed||Change, %|
|Index||Change, points||Closed||Change, %|
|02:00||China||Retail Sales y/y||July||-1.8%||0.1%|
|02:00||China||Industrial Production y/y||July||4.8%||5.1%|
|02:00||China||Fixed Asset Investment||July||-3.1%||-1.6%|
|04:30||Japan||Tertiary Industry Index||June||-2.1%|
|06:30||Switzerland||Producer & Import Prices, y/y||July||-3.5%|
|09:00||Eurozone||Employment Change||Quarter II||-0.2%||-1.7%|
|09:00||Eurozone||Trade balance unadjusted||June||9.4||12.6|
|09:00||Eurozone||GDP (QoQ)||Quarter II||-3.6%||-12.1%|
|09:00||Eurozone||GDP (YoY)||Quarter II||-3.1%||-15%|
|12:30||U.S.||Unit Labor Costs, q/q||Quarter II||5.1%||6.2%|
|12:30||U.S.||Nonfarm Productivity, q/q||Quarter II||-0.9%||1.5%|
|12:30||U.S.||Retail Sales YoY||July||1.1%|
|12:30||U.S.||Retail sales excluding auto||July||7.3%||1.3%|
|13:15||U.S.||Industrial Production YoY||July||-10.8%|
|13:15||U.S.||Industrial Production (MoM)||July||5.4%||3%|
|14:00||U.S.||Reuters/Michigan Consumer Sentiment Index||August||72.5||72|
|17:00||U.S.||Baker Hughes Oil Rig Count||August||176|
CURRENCY MARKET DEFINITION
The concept of currency market has several definitions:
Simply put, currency market is the market where currency transactions are made, that is, the currency of one country is exchanged for the currency of another country at a certain exchange rate. The exchange rate is the relative price of currencies of two countries or the currency of one country expressed in another country's monetary units.
Currency market is part of the global financial market, where many operations related to the global movement of capital take place.
TYPES OF MARKETS. RUSSIAN AND INTERNATIONAL CURRENCY MARKETS
There are international and domestic currency markets.
Domestic currency market — is a market within a single country.
The international currency market — is a global market that covers currency markets of all countries in the world. It does not have a specific site where trading is carried out. All operations within it are carried out through a system of cable and satellite channels that link the world's regional currency markets. Regional markets today include the Asian (with centers in Tokyo, Hong Kong, Singapore, and Melbourne), the European (London, Frankfurt am Main, and Zurich), and the American (New York, Chicago, and Los Angeles) markets.
Currency trading on the international currency market is carried out on the basis of market exchange rates, which are set on the basis of supply and demand in the market and under the influence of various macroeconomic data. Forex is the international currency market.
Currency markets can also be divided into exchange and over-the-counter markets. Exchange currency market is an organized market where trading is carried out through an exchange—a special company that sets trading rules and provides all the conditions for organizing trading under these rules.
Over-the-counter currency market — is a market where there are no certain trading rules, and purchase and sale operations are not linked to a specific place of trade, as opposed to the case of an exchange.
As a rule, an over-the-counter currency market is organized by special companies that provide services for the purchase and sale of currencies, which may or may not be members of the currency exchange. Trading operations in this market are now carried out mainly via the Internet.
The over-the-counter currency market is much larger than the exchange market in terms of trading volume. The Forex international over-the-counter currency market is considered the most liquid in the world. It operates around the clock in all financial centers of the world (from New York to Tokyo).
CURRENCY MARKET FUNCTIONS
Currency market— is the most important platform for ensuring the normal course of all global economic processes.
The main macroeconomic functions of the currency market are:
Various currencies are the main trading tool in the currency market. Exchange rates are formed under the influence of supply and demand in the market.
In addition to that, currency rates are influenced by many fundamental factors related to the global economic situation, events in national economies, and political decisions.
News about these factors can be found in various sources:
The more stable an economy is developing, the more stable its currency is. Accordingly, it is possible to predict how the currency will behave in the near future, based on statistical data published in official sources of countries with a certain regularity.
This data includes:
Interest rate level, set by national authorities regulating credit policy, is an equally important indicator. In the European Union, this is ECB–the European Central Bank, in the US, this is the Federal Reserve System, in Japan—the Bank of Japan, in the UK—the Bank of England, in Switzerland—the Swiss national Bank, etc.
The interest rate level is determined at meetings of the national central bank. Then, the decision on the rate is published in official sources. If the central bank of a country reduces the interest rate, the money supply in the country increases, and the national currency depreciates against other world currencies. If the interest rate increases, the national currency will strengthen.
A speech or even a separate statement by a country's leader can reverse a trend. Speeches on these topics may change the currency exchange rate:
All this news is published in various sources. Major international news is more or less easy to find in Russian, but news related to the domestic economic policy and the economy of foreign countries is much less common in the Russian press. Mostly, such news is published by the national media and in the language of the country where the news is published.
It is very difficult for one person to follow all the news at once, and they are likely to miss some important event that can turn the whole situation on the market upside down. Guided by our main principle—to create the best trading conditions for our customers—we try to select the most important news from all over the world and publish them on our website.
The TeleTRADE Department of Analytics monitors news on most national and international news sources on a daily basis and identifies those that can potentially affect exchange rates. These are the main news items that are included in our news feed.
In addition, all our clients have free access to the Dow Jones news feed. This is a joint project of Dow Jones Newswires, the world's largest news agency, and the leading Russian news agency Prime-TASS. The news feed is created specifically for currency traders and those who are interested in getting information about the world's currency markets.
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