|01:30||Australia||House Price Index (QoQ)||Quarter II||1.6%||-1%|
|01:30||Australia||RBA Meeting's Minutes|
|02:00||China||Retail Sales y/y||August||-1.1%||0.1%|
|02:00||China||Industrial Production y/y||August||4.8%||5.1%|
|02:00||China||Fixed Asset Investment||August||-1.6%||-0.4%|
|06:00||United Kingdom||Average earnings ex bonuses, 3 m/y||July||-0.2%||-0.2%|
|06:00||United Kingdom||Average Earnings, 3m/y||July||-1.2%||-1.3%|
|06:00||United Kingdom||ILO Unemployment Rate||July||3.9%||4.1%|
|06:00||United Kingdom||Claimant count||August||94.4|
|06:30||Switzerland||Producer & Import Prices, y/y||August||-3.3%|
|08:00||France||IEA Oil Market Report|
|09:00||Eurozone||ZEW Economic Sentiment||September||64.0|
|09:00||Germany||ZEW Survey - Economic Sentiment||September||71.5||69.8|
|12:30||Canada||Manufacturing Shipments (MoM)||July||20.7%||8.7%|
|12:30||U.S.||NY Fed Empire State manufacturing index||September||3.7||5.95|
|12:30||U.S.||Import Price Index||August||0.7%||0.5%|
|13:15||U.S.||Industrial Production (MoM)||August||3%||1%|
|13:15||U.S.||Industrial Production YoY||August||-8.2%|
|22:45||New Zealand||Current Account||Quarter II||1.56||0.595|
|23:50||Japan||Trade Balance Total, bln||August||11.6||-37.5|
ING's DM economist James Smith and senior rates strategist Antoine Bouvet note that with November action from the Bank of England (BOE) looking ever-more-likely, they'll be watching closely to see if policymakers offer up any further clues on which tools they're most likely to use. The message of recent weeks suggests QE remains the preferred tool, although negative rates can't be ruled out either over the coming months.
"While it’s unlikely the Bank will rock the boat too much this week, there are two interesting questions."
"Firstly, will policymakers acknowledge that the downside risks to their August forecasts are growing? Certainly, some MPC members have been sounding more cautious in recent weeks."
"And if so, secondly, will the Bank offer any clues as to how it might increase the level of stimulus in November? Despite the recent hype surrounding negative rates, Governor Andrew Bailey has indicated that he believes quantitive easing (QE) is a more useful marginal policy tool, and this is likely to be at the centre of the stimulus package we expect in the autumn."
"On interest rates, there was a lot of discussion about the pros and cons of negative rates in the last monetary policy report, but the Bank is clearly still on the fence about how useful they might prove to be. In the first instance, we suspect policymakers will look to lower the interest rate on the Term-Funding Scheme, which incentivises lending to SMEs. However full-blown negative rates are also a clear possibility over coming months, particularly if the economic outlook were to worsen materially."
"The near-term outlook for gilt yields is more likely to be driven by any Brexit-related flight to quality flow than central bank action. This is because with about one and a half month before the all-important November meeting, odds of leaving the EU without a trade deal in place have time to swing about quite significantly. Nevertheless, Thursday’s meeting will be key in shaping expectations of further easing in November, and what form it would take."
"We think the market consensus is quickly converging towards answering the first question, whether to add easing in November, in the affirmative. This is not to say a dovish rates reaction to the BOE is impossible, but the bar is high, and it will largely depend on the MPC’s easing preference."
"Inputting two different scenarios to our long-term monetary gilt model highlights that the highest probability-scenario is also the least impactful."
"In light of recent MPC communication, markets have shifted back to QE being the most likely easing tool in the near future. This explains in part why an additional £100bn of QE would only shift 10-year gilt ‘monetary FV’ lower by 20p by the end of 2021. More importantly, perhaps, this outcome on its own would not amount to a change in dynamic for GBP rates, with the floor holding firm around 0%."
FXStreet notes that the CAD has recovered all of the ground lost to the USD during the early phases of the COVID-19 lockdown but economists at HSBC believe the drop in USD/CAD has more to do with USD disdain than CAD enthusiasm. The Canadian dollar remains vulnerable to a still challenging economic outlook and the political outlook in Canada also seems uncertain. The economists retain a bearish bias toward the CAD.
“The difficulty for the CAD is where things go from the post-lockdown bounce in activity. The government support programmes are set to be tapered and then end. Canada has less room to manoeuvre on the fiscal front than some others in the G10, before that cyclical or structural trade-off becomes more of an issue for FX.”
“Political uncertainty could also rise in Canada. Parliament will return when the current proroguing ends on 23 September, and the government announces its new long-term economic plan.”
“All in all, our bearish view on the CAD appears not to have been shared by the market, but we remain cautious on the CAD and still look for USD/CAD to rise, albeit at a gradual pace.”
Strategists at ING suggests that the key event of the week is the FOMC meeting (Wednesday).
"While the central bank may seek to operationalise its new average inflation targeting approach with some additional forward guidance, the soft Fed policy looks largely priced in following Chair Jerome Powell’s Jackson Hole speech, meaning that more positive news is needed to push cyclical currencies higher and the dollar lower."
"With fragile equity markets and risk sentiment, it is unlikely to happen this week, in our view."
U.S. stock-index futures surged on Monday, as investor sentiment was underpinned by news about a series of multi-billion M&A-deals and COVID-19 vaccine hopes.
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
Verizon Communications Inc
Wal-Mart Stores Inc
Walt Disney Co
Yandex N.V., NASDAQ
FXStreet notes that the S&P 500 extends its corrective setback and whilst economists at Credit Suisse see scope for a near-term bounce on Monday, the “ideal” scenario remains to look for a deeper corrective setback to test support at 3280/60.
“The S&P 500 extends its corrective setback and although we see scope for a near-term bounce this morning, with a bearish ‘outside day’ in place from last week and with the market still below its 13-day exponential average, currently seen at 3410, the risk for a deeper setback remains. Key to the broader picture as to the severity of a setback remains seen from rates markets though and whether we see a more decisive move lower in 10yr US Breakevens and a base in 10yr US Real Yields, neither of which we have yet to seen, although the risk of which very much remains.”
“Above 3369 would suggest there is scope for a move back to 3395, potentially 3410, but we look for this latter level to then ideally cap for a move back to 3307/03 ahead of our ‘ideal’ objective and what we look to be better support at 3280/59 where we will look for a floor – the 38.2% retracement of the rally from mid-May, 23.6% retracement of the entire rally from March, July high and 63-day average.”
"The A1 rating affirmation and stable outlook are supported by Moody's assessment that the strength of China's institutions and governance, and in particular the effectiveness of government policies, support the sovereign's capacity to mitigate the credit risks that result from ongoing increases in public sector debt, pockets of financial stress likely to become apparent from time to time, and slowing growth potential albeit from high rates," Moody’s stated in its press-release.
FXStreet notes that this month's Bank of England (BoE) decision isn't expected to be any kind of turning point, with no new forecasts at this meeting and no need to address the QE program as it still has room to run. Economists at TD Securities would not be surprised to see investors fade some of GBP's recent declines as the meeting itself approaches. However, with a multitude of other drivers in play, they do not think the September MPC meeting is likely to provide a strong directional push.
“We look for the BoE to keep its policy stance unchanged, but for the minutes to show more concern about the downside risks to the growth outlook. The MPC view appears to have taken a more dovish turn since August.”
“With the risk backdrop still highly fragile, we think sterling will remain a favourite of those looking for a vehicle to express negative sentiment for some time yet. Here, we think 1.2665 should be the next major reassessment level on a move lower.”
“The very near-term outlook still argues for some patience. As we begin to approach MPC meeting, however, we think the market may begin to fade some of sterling's recent weakness. With Brexit negotiations now on hold until 28 September, the next real event risk of major consequence is a special meeting of EU leaders (24/25 September).”
|09:00||Eurozone||Industrial Production (YoY)||July||-12%||-8.2%||-7.7%|
|09:00||Eurozone||Industrial production, (MoM)||July||9.5%||4%||4.1%|
USD fell against most other major currencies in the European session on Monday as risk sentiment was lifted by news about a series of multi-billion M&A-deals in the tech and pharmaceutical sectors and the resumption of AstraZeneca/Oxford University's coronavirus vaccine trial.
Oxford University announced on Saturday that it is resuming testing of a Covid-19 vaccine it is developing with AstraZeneca (ANZ). The late-stage trial was paused last week following the unexplained illness of one of its participants in the UK.
In addition, Pfizer's (PFE) CEO Albert Bourla stated that the company should know by the end of October whether its coronavirus vaccine candidate will work. If Pfizer's Covid-19 vaccine gets approved, it could be distributed in the U.S. by the end of 2020, he added.
Improving risk sentiment was further reinforced by the announcements that Nvidia (NVDA) agreed to acquire chip designer Arm Holdings for $40 billion, while Gilead Sciences (GILD) reached an agreement to purchase biotech company Immunomedics (IMMU) for $21 billion. In addition, the NY Times reported that Oracle (ORCL) emerges as the preferred buyer for TikTok's U.S. business.
Market participants are looking for an interest rates decision from the Federal Reserve and a press conference from its Chairman Jerome Powell later this week. It is expected that the Fed will keep its rates and QE unchanged at the September meeting.
economist Lee Sue Ann at UOB Group assessed the latest ECB event.
“The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were left unchanged at 0.00%, 0.25% and -0.50%, respectively.”
“The ECB will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR1.350tn.”
“Going forward, how the COVID-19 pandemic evolves will remain important to the economic recovery. The upward trend in new cases is worrying, where numbers have climbed in Spain and France since mid-August. For now, none of the negative developments since June may have been sufficient for the ECB to announce additional monetary stimulus. But the prospect of further loosening of monetary conditions before year-end remains high, and the ECB will be erring heavily on the side of caution, especially if the inflation picture remains weak.”
Bert Colijn, a Senior Eurozone Economist at ING, notes that Eurozone's production rose by 4.1% in July as the start of the third quarter is still boosted by the positive effects on industries reopening after lockdowns, but downside risks to the industrial outlook remain.
"The increase in July was not as fast as it was in June, but still eurozone industry continues to see meaningful increases on a monthly basis to get closer to pre-corona levels of output. The recovery was still very broad-based, with all product categories experiencing a solid increase."
"Almost all eurozone countries saw production growth in July, with especially strong rebound effects seen in Spain and Italy at 9.4 and 7.4%."
"While the service sector is starting to see more signs of rebound fatigue, August survey data on the manufacturing sector suggests that industrial production continued to regain significant ground. This is not a luxury though; production is currently still roughly 7% below pre-crisis levels. While domestic demand strength at the start of the lockdown recovery has been promising, worries about the export environment and increasing unemployment mean that the outlook for industrial recovery continues to be rather uncertain for the months ahead."
Reuters reports that Europe's largest economy is set to continue recovering from the coronavirus crisis in the remainder of 2020 and will likely grow strongly in the third quarter but it probably will not reach its pre-crisis level until 2022, the German Economy Ministry said.
The trough of the recession was reached in the second quarter and the easing of lockdown measures since May led to a rapid recovery in industry and in some service sectors, the ministry said in its monthly report.
"The German economy is continuing to pick up, albeit at a more moderate pace," the ministry said.
The ministry said significant economic growth was likely in the third quarter thanks to impetus from May and June, when there were signs of a rebound.
It said exports remained far from their pre-coronavirus levels and while industrial production had returned to almost 90% of its pre-coronavirus level and was continuing to rise, it had lost some momentum.
FXStreet reports that EUR/USD remains sidelined near-term and needs to clear 1.1930 to ease the threat of a top. Key support remains seen at 1.1754/53, analysts at Credit Suisse inform.
“Whilst the threat of a top remains a real risk the immediate risk stays seen mildly higher within the broader range whilst above 1.1799/944. Above 1.1875 is needed to clear the way for a move back to 1.1913/30, above which should see a move back to 1.2011 and eventually our 1.2145/55 first major upside objective – the ‘neckline’ to the early 2018 top and the 78.6% retracement of the entire 2018/2020 fall. We would look for a cap here for a fresh phase of consolidation.”
According to the report from Eurostat, in July 2020, a month marked by some relaxation of COVID-19 containment measures in many Member States, the seasonally adjusted industrial production rose by 4.1% in both the euro area and EU, compared with June 2020. Economists had expected a 0.3% increase in the euro area. In June 2020, industrial production rose by 9.5% in the euro area and by 9.6% in the EU.
In July 2020 compared with July 2019, industrial production decreased by 7.7% in the euro area and by 7.3% in the EU. Economists had expected a 8.2% decrease in the euro area.
In the euro area in July 2020, compared with June 2020, production of capital goods rose by 5.3%, durable consumer goods by 4.7%, intermediate goods by 4.2%, non-durable consumer goods by 3.9% and energy by 1.1%. In the EU, production of capital goods rose by 5.6%, durable consumer goods by 4.8%, intermediate goods by 3.9%, non-durable consumer goods by 2.8% and energy by 1.3%.
In the euro area in July 2020, compared with July 2019, production of capital goods fell by 10.4%, intermediate goods by 9.3%, energy by 6.2%, durable consumer goods by 3.8% and non-durable consumer goods by 1.9%. In the EU, production of capital goods fell by 10.2%, intermediate goods by 8.7%, energy by 6.6%, non-durable consumer goods by 2.5% and durable consumer goods by 2.0%.
FXStreet reports that there is still scope for USD/CNH to slip back to the 6.80 area in the next weeks, according to FX Strategists at UOB Group.
Next 1-3 weeks: “In our latest narrative from last Wednesday (09 Sep, spot at 6.8510), we indicated that ‘the odds for further USD weakness have diminished considerably’. We added, ‘unless USD moves and stays below 6.8350 within these 1 to 2 days, a breach of the ‘strong resistance’ at 6.8800 would not be surprising and would indicate that the negative phase in USD that started in mid-August has run its course’. USD subsequently traded in a quiet manner and downward momentum continues to deteriorate. That said, as long as 6.8550 (‘strong resistance’ previously at 6.8800) is intact, there is still a slim chance that USD could push lower towards the support at 6.8000.”
Bloomberg reports that BP Plc said the relentless growth of oil demand is over, becoming the first supermajor to call the end of an era many thought would last another decade or more.
Oil consumption may never return to levels seen before the coronavirus crisis took hold, BP said in.
BP is making a profound break from orthodoxy. From the bosses of corporate energy giants to ministers from OPEC states, senior figures from the industry have insisted that oil consumption will see decades of growth.
The U.K. giant is describing a different future, where oil’s supremacy is challenged, and ultimately fades. That explains why BP has taken the boldest steps so far among peers to align its business with the goals of the Paris climate accord.
That’s because he suspects oil use may already have peaked as a result of the pandemic, stricter government policies and changes in consumer behavior. BP’s energy outlook shows consumption slumping 50% by 2050 in one scenario, and by almost 80% in another. In a “business-as-usual” situation, demand would recover but then flatline near 100 million barrels a day for the next 20 years.
Reuters reports that former British prime minister David Cameron expressed concern at Boris Johnson's plan to break international law by overriding parts of the Brexit divorce treaty with the European Union.
"Passing an act of parliament and then going on to break an international treaty obligation is the very, very last thing you should contemplate. It should be an absolute final resort," Cameron told.
Former prime ministers Tony Blair and John Major said on Sunday that Britain must drop its "shocking" plan.
However, Cameron did not go that far, saying a proposed bill that lawmakers will vote on later on Monday - and which the government has said would breach international law - had to be seen in the context of tough trade talks with the EU.
FXStreet reports that AUD/USD is forecasted to keep the consolidative mood likely between 0.7200 and 0.7350 in the next weeks, suggested FX Strategists at UOB Group.
Next 1-3 weeks: “We highlighted on Wednesday (09 Sep, spot at 0.7215) that AUD ‘is under mild downward pressure and is likely to trade with a downward bias towards 0.7150’. We added, ‘the current mild downward pressure is deemed as intact unless AUD moves back above 0.7295 within these few days’. AUD rose to a high of 0.7325 yesterday (10 Sep) and despite closing on a soft note at 0.7257 (-0.36%), downward momentum has more or less dissipated. To look at it another way, the current movement in AUD is viewed as part of a consolidation phase and it could trade between 0.7200 and 0.7350 for a period of time.”
Reuters reports that investment bank Goldman Sachs said that odds of a damaging no-deal Brexit are "meaningfully lower" than the market is implying and for investors willing to look through short-term volatility, current sterling levels are attractive.
The bank said the market was pricing 40%-45% odds of Britain ending its post-Brexit transition period without reaching a free-trade agreement with the European Union.
While those odds could rise further, Goldman Sachs said the UK government was aware how damaging a no-deal outcome would be to the economy.
|04:30||Japan||Tertiary Industry Index||July||7.9%||-0.5%|
|04:30||Japan||Industrial Production (YoY)||July||-18.2%||-15.5%|
|04:30||Japan||Industrial Production (MoM)||July||1.9%||8%||8.7%|
During today's Asian session, the US dollar stabilized against the euro and declined against the yen. This week, traders are waiting for the results of the meeting of the US Federal Reserve System, the Bank of Japan and the Bank of England.
Investors' appetite for risk was boosted by news of the resumption of trials of a vaccine being developed by pharmaceutical company AstraZeneca and the University of Oxford.
Meanwhile, the Liberal democratic party of Japan is due to choose its Chairman on Monday to become the country's Prime Minister. The key candidate for the post is Japanese Cabinet Secretary General Yoshihide Suga, who is expected to continue Shinzo Abe's course of maintaining low borrowing costs and deregulation.
The Tankan index, which measures the level of business confidence of large Japanese manufacturing companies, rose by 4 points in September compared to the previous month and amounted to -29 points. The value of the indicator was the highest in six months, but industrial companies remain pessimistic about the pace of economic growth.
The ICE index, which tracks the dynamics of the US dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell by 0.17% during trading.
Bloomberg reports that according to strategists at Goldman Sachs Group Inc. and Deutsche Bank AG, the recent pullback in U.S. stocks could be close to an end if history is a guide,
Its magnitude has matched a “typical” selloff in the S&P 500 since the financial crisis, albeit at a faster pace, wrote a team led by Goldman’s David Kostin in a note. And options positioning -- at the core of the weakness -- has normalized, noted their counterparts at Deutsche including Srineel Jalagani.
“Despite the sharp sell-off in the past week, we remain optimistic about the path of the U.S. equity market in coming months,” wrote the Goldman strategists. “Since the financial crisis, the typical S&P 500 pullback of 5% or more has lasted for 20 trading days and extended by 7% from peak to trough, matching the magnitude of the most recent pullback if not the speed.”
Meanwhile, the Deutsche team focused on the impact of the options market, using a metric that looks at the number of bearish contracts relative to bullish ones. It had fallen to the bottom of its 10-year range -- indicating an extreme level of positive sentiment -- but after the correction has already recovered to “about average” levels, the team said.
“Historically, corrections in the put-call ratio have tended to have sharp but short-lived market impacts,” the strategists wrote.
Still, both teams pointed to the U.S. elections as the key source of uncertainty for markets ahead.
Reuters reports that Japanese Chief Cabinet Secretary Yoshihide Suga, a longtime loyal aide of outgoing Prime Minister Shinzo Abe, was poised to win a ruling party leadership election on Monday, virtually ensuring that he replaces Abe this week in the nation’s top job.
Suga, who has said he would pursue Abe’s key economic and foreign policies, is expected to get the bulk of votes from 394 Liberal Democratic Party (LDP) lawmakers and is likely to win a majority of 141 votes from the party’s local chapters.
Suga was on track to win over 70% of the MPs’ votes and was leading among local chapters, public broadcaster NHK reported.
The winner of the LDP race is virtually certain to be elected prime minister in a parliamentary vote on Wednesday because of the LDP’s majority in the lower house. He will serve out Abe’s term as party leader through September 2021.
Abe, Japan’s longest serving premier, said last month he would quit due to ill health, ending a nearly eight-year term.
FXStreet reports that in opinion of FX Strategists at UOB Group, Cable’s outlook remains weak and could drop to the 1.2680 region in the next weeks.
Next 1-3 weeks: “We expected GBP to weaken since earlier this week. In our latest narrative from Wednesday (09 Sep, spot at 1.2965), we highlighted that ‘while the rapid drop appears to be overdone, strong downward momentum suggests GBP could weaken further towards the critical support at 1.2855’. We added, ‘a clear break of this level could potentially lead to further weakness towards 1.2680’. The 1.2855 level did not offer any ‘support' as GBP crashed to an overnight low of 1.2773. In other words, the outlook for GBP remains weak and the next level to focus on is at 1.2680. Looking forward, the next support is at 1.2610. On the upside, the ‘strong resistance’ level has moved lower to 1.3050 from 1.3120 previously. On a shorter-term note, 1.2950 is already quite a solid level.”
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1846
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date September, 4 is 62387 contracts (according to data from September, 11) with the maximum number of contracts with strike price $1,1700 (4415);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2818
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date September, 4 is 13585 contracts, with the maximum number of contracts with strike price $1,3600 (1156);
- Overall open interest on the PUT options with the expiration date September, 4 is 15057 contracts, with the maximum number of contracts with strike price $1,3150 (2619);
- The ratio of PUT/CALL was 1.11 versus 1.07 from the previous trading day according to data from September, 11
* - 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.
|Raw materials||Closed||Change, %|
|Index||Change, points||Closed||Change, %|
|04:30||Japan||Tertiary Industry Index||July||7.9%|
|04:30||Japan||Industrial Production (YoY)||July||-18.2%|
|04:30||Japan||Industrial Production (MoM)||July||1.9%||8%|
|09:00||Eurozone||Industrial Production (YoY)||July||-12.3%||-8.2%|
|09:00||Eurozone||Industrial production, (MoM)||July||9.1%||4%|
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