Inflation Figures and the Loonie in Focus, with an Eye on Trump

Earlier in the Day:

Economic data released through the Asian session this morning was limited to New Zealand wholesale inflation figures for the 2^nd quarter, leaving the markets to consider what lies ahead as China and Canada prepare to return to the negotiating table to discuss trade terms with the U.S, ahead of a resumption of trade talks between Japan and the U.S next month.

With the mid-terms rapidly approaching, the U.S President will be looking to wrap up trade talks to avoid a material impact on the U.S and global economies and for the U.S equity markets to recover from their recent sell-offs.

For the Kiwi Dollar, Producer Input Prices rise by 1% in the 2^nd quarter, quarter-on-quarter, following a 1^st quarter 0.6% rise.

The rise in producer input prices was attributed to rising fuel costs, petrol bought by businesses rising by 5.5%, while diesel was up 9.8%. The higher costs for fuel impacted other industries such as road transport that saw input prices rise by 2%, largely as a result of rising petrol and diesel prices.

The Kiwi Dollar moved from $0.65865 to $0.65863 upon release of the figures, before rising to $0.6595 at the time of writing, up 0.12% for the session.

Elsewhere, the Japanese Yen was up 0.04% to ¥110.86 against the U.S Dollar, while the Aussie Dollar found further support off the back of Thursday’s gains, rising by 0.10% to $0.7268, the upside coming off the back of hopes of an end to the ongoing trade war.

More material gains in the Aussie Dollar were pinned back, with RBA Governor Lowe maintained the RBA’s view that there was no intention to move on rates anytime soon in testimony to Parliament, while stating that the next move would likely be upwards.

In the equity markets, it was bitter sweet for the markets, with the positive being the prospect of the U.S and China finally sitting down to finally discuss trade terms, following months of trade rhetoric, while the negative was suggestions overnight of possible sanctions on China over China’s intentions to continue importing and possibly increasing Iran oil imports.

The CSI300 gave up early gains and was down 0.21% at the time of writing, while the Nikkei, Hang Seng and CSI300 were all in positive territory, the Nikkei leading the way with a 0.53% rise, tech stocks finding much needed support, while financials were also the beneficiary of news that China and the U.S are begin talks.

The Day Ahead:

For the EUR, finalized Eurozone July inflation figures are scheduled for release, which are unlikely to have a material impact on the EUR through the day, with a number of geo-political risks overshadowing economic data over the week.

While Turkey may have been given a life line by Qatar, easing immediate pressure, there’s a long way to go and if the length of the ongoing trade spat between the U.S and China is anything to go by, the Turkish President is going to have to succumb to the demands of Washington else deliver a financial and economic crisis that could once again see the EUR slide back to $1.12 levels and possibly lower.

At the time of writing, the EUR was up 0.02% to $1.1379, with market sentiment towards Turkey and China and the prospects of resolving existing issues and differences the key drivers through the day.

For the Pound, there are no material stats scheduled for release following a week of key data that failed to reignite appetite for the Pound. The stats gave little reason for a shift in sentiment towards BoE monetary policy over the near-term, as Brexit continues to remain a material uncertainty for the UK economy.

At the time of writing, the Pound was down 0.01% to $1.2715, with Brexit chatter the key driver through the day.

Across the Pond, economic data scheduled for release out of the U.S is limited to prelim August consumer sentiment figures that are forecasted to hold relatively steady from July numbers that should leave the Dollar unscathed.

August Philly FED Manufacturing numbers released on Thursday failed to materially weigh on the Dollar, with the Dollar managing to recover from immediate losses following the release of the stats, providing further evidence that the market bet would be on the Dollar should there be a lack of progress on trade talks and Erdogan’s offering fails to impress the U.S administration.

At the time of writing, the Dollar Spot Index was down 0.07% to 96.578, with today’s stats expected to provide some direction, while the Oval Office will remain the key area of focus going into the weekend.

For the Loonie, following a relatively quiet week on the data front, July inflation numbers due out this afternoon will provide some direction, though actual will need to be better than forecast for the Loonie to get support from the numbers.

We will expect June foreign securities purchases to be largely brushed aside, with the key number this afternoon being July’s month-on-month core inflation number.

At the time of writing, the Loonie was up 0.04% to C$1.3151, with today’s stats and any updates on NAFTA expected to provide direction through the day.