Economic Data, Brexit and U.S Politics Keep the Majors in Focus

It’s a hectic day ahead. Economic data out of China delivering mixed results, as the focus shifts to the EUR, Brexit, trade and U.S politics.
Bob Mason
Light Board

Earlier in the Day:

It was a particularly busy day on the economic calendar through the Asian session this morning.

New Zealand building consents and business confidence numbers, and Japan retail sales and industrial production figures provided early direction.

Later in the session, September private sector PMI numbers out of China and Australia August private sector credit figures also influenced.

Outside of the numbers, geopolitical risk continued to be a test for the majors. Negative sentiment towards trade tested risk sentiment early on.

For the Kiwi Dollar

Building consents rose by 0.8% in August, following a 1.3% decline in July. Economists had forecast a 2.7% fall.

According to NZ Stats,

  • Consents for stand-alone houses fell by 1.5%.
  • In the year ended August 2019, the number of new dwellings consented rose by 8.8%.
  • By region, an 11% jump in consents in Auckland drove the headline number.

The Kiwi Dollar moved from $0.62880 to $0.62902 upon release of the figures that preceded Business confidence figures later in the morning.

Business Confidence deteriorated further in September. The ANZ Business Confidence Index fell from -52.30 to 53.50.

According to the latest ANZ Report,

  • Investment intentions fell by 5 points to -9, with profit expectations falling by 5 points to a net 25% of respondents expecting profitability to decline.
  • Employment intentions eked out a 1 point gain to a net 8% of firms intending to reduce employment.
  • Cost pressures fell by 2 points to +47, with inflation expectations falling from 1.70% to 1.63%. Price intentions fell by 2 points to a net 18% of firms expecting to raise prices.

The Kiwi Dollar moved from $0.62856 to $0.62812 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.40% to $0.6271.

For the Japanese Yen

Industrial production fell by 1.2% in August, according to prelim figures, following a 1.3% rise in July. Economists had forecasted a 0.5% decline.

According to finalized figures released by the Ministry of Economy, Trade, and Industry,

  • Industries that mainly contributed to the decrease, in order, were
    • Iron, steel and non-ferrous metals.
    • Production machinery.
    • Motor vehicles.
  • Industries that mainly contributed to the increase, in order, were
    • Electronic parts and devices.
    • Chemicals (excl. inorganic, organic chemicals, and medicine).
    • Inorganic and organic chemicals.
  • For September, industrial production is projected to rise by 1.9%, whilst forecasted to fall by 0.5% in October.
    • An increase in the production of production machinery, electrical machinery and information and communication electronics equipment and ‘others’ are forecasted to provide support in September.
    • A decrease in the production of transport equipment, electrical machinery and information and communication electronics equipment, and electronics parts and devices are forecasted to weigh on production in October.

Retail sales rose by 2% in August, reversing a 2% decline in July, according to the Ministry of Economy, Trade, and Industry. Economists had forecast a 0.9% rise.

The Japanese Yen moved from ¥107.944 to ¥107.956 upon release of the figures.

At the time of writing, the Japanese Yen was down by 0.02% to ¥107.94 against the U.S Dollar.

Out of China

The NBS Manufacturing PMI rose from 49.5 to 49.8 in September, coming in ahead of a forecasted 49.5, while the non-manufacturing PMI fell from 53.8 to 53.7. Economists had forecast a rise to 54.2.

For the manufacturing sector, it was the 5th consecutive monthly contraction as trade tariffs continued to bite.

The Aussie Dollar moved from $0.67573 to $0.67566 upon release of the figures that preceded the Caixin PMI numbers and stats out of Austalia.

Later in the morning, the Caixin Manufacturing PMI jumped from 50.4 to 51.4. Economists had forecast a fall to 50.2.

According to the September Markit Survey,

  • Production and total new orders expanded at a quicker pace, while new export business reduced further.
  • Firms reportedly expanded their buying activity and inventories, though at marginal rates.
  • Factory gate prices stabilized after 2 consecutive months of discounting, while input prices rose due to currency movements.

The Aussie Dollar moved from $0.67624 to $0.67698 upon release of the figures.

For the Aussie Dollar

Month-on-month, private sector credit rose by 0.2% in August, according to figures released by RBA, which worse than a forecast of 0.3%. Private sector credit had risen by 0.2% in July

The Aussie Dollar moved from $0.67575 to $0.67624 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.03% to $0.67637.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. German retail sales and employment figures are due out in the early part of the day.

Later in the session, the Eurozone’s unemployment rate is also due out later in the day.

We would expect the EUR to be particularly sensitive to the numbers.

Spanish GDP and inflation figures will likely have limited influence on the EUR.

Outside of the numbers, expect Brexit chatter, trade, and impeachment talk from the U.S to also influence.

At the time of writing, the EUR was down by 0.05% to $1.0934.

For the Pound

It’s also a relatively busy day ahead on the data front. 2nd quarter GDP and business investment figures are due out later this morning.

We can expect the Pound to be sensitive to any contraction in the UK economy, following better than expected 2nd estimate numbers.

Outside of the numbers, Brexit will continue to be the key driver. France and Finland had imposed a 30th September deadline, which will leave the Pound sensitive to any updates.

There’s also the Tory Party Conference to consider throughout the day.

At the time of writing, the Pound was down by 0.01% to $1.2291.

Across the Pond

It’s a quiet day ahead on the economic calendar. Key stats are limited to September’s Chicago PMI. With a lack of stats, we can expect the Dollar to be responsive to the figures.

Outside of the numbers, expect impeachment and trade chatter to be the key drivers on the day.

The Dollar Spot Index was up by 0.04% to 99.151 at the time of writing.

For the Loonie

It’s a quiet start to the week on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

A lack of stats will leave the Loonie in the hands of market risk sentiment, with China’s private sector PMIs likely to be the key influence on oil prices and the Loonie.

The Loonie was up by 0.06% at C$1.3239, against the U.S Dollar, at the time of writing.

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