It’s Another Dollar Day with 2nd Quarter Growth in Focus

Earlier in the Day:

Economic data released through the Asian session this morning included July core inflation figures out of Japan and 2^nd quarter wholesale inflation numbers out of Australia.

For the Japanese Yen, Tokyo core CPI rose by 0.8% year-on-year in July, which was better than a forecasted 0.7%, with inflation picking up from June’s 0.7%, though the numbers will still leave the BoJ struggling, the 0.8% number sitting well below the BoJ’s target, with inflation showing very little sign of a shift to give the BoJ an opportunity to move on policy.

The Japanese Yen moved from ¥111.218 to ¥111.159 against the Dollar upon release of the figures, before rising to ¥110.98 at the time of writing, a gain of 0.22% for the session.

For the Aussie Dollar, based on figures released by the ABS, final demand prices rose by 1.5% in the 2^nd quarter, year-on-year, the annual rate of wholesale price inflation easing from a 1^st quarter 1.7%. Month-on-month, final demand prices rise by 0.3%, coming up short of a forecasted 0.4% rise and a 1^st quarter 0.5% increase.

• The month-on-month increase was attributed to prices received for heavy and civil engineering construction (+1.5%); building construction (+1.2%) and petroleum refining and petroleum fuel manufacturing (+11.9%).
• Offsetting the upside were falls in prices received for other agriculture (-2.9%); fishing (-18.9%) and professional and scientific equipment manufacturing (-2.3%).

The Aussie Dollar moved from $0.73848 to $0.73814 upon release of the figures, before rising to $0.7388, a gain of 0.15% for the morning. For the Kiwi Dollar, a lack of data left the Kiwi flat for the session, following Thursday’s 0.78% slide, the Kiwi down just 0.04% to $0.6781 at the time of writing.

In the equity markets, it was a mixed morning, the Nikkei reversing start of the day gains following the release of the July inflation figures to sit with a 0.28% rise at the time of writing, while the Hang Seng and CSI300 look to be heading for a 2^nd consecutive day of losses, down 0.05% and by 0.09% respectively.

For the Hang Seng, a more than 1% slide in Tencent holdings contributed to the pullback, with tech stocks under pressure following Facebook’s close to 20% slide on Thursday.

Things were better for the ASX200, following 2 consecutive days of losses, the index up 0.74% at the time of writing, the gains pulling the index into positive territory for the current week.

The Day Ahead:

For the EUR, economic data scheduled for release out of the Eurozone this morning is limited to prelim 2^nd quarter GDP numbers and June consumer spending figures out of France.

While 1^st estimate figures are forecasted to show a slight uptick in growth in the 2^nd quarter, which will likely have the greater impact on the EUR, consumer spending is forecasted to slow and, with Draghi keeping the outlook for policy unchanged, any slight pickup in growth, which has been expected in the 2^nd quarter, is unlikely to fuel a EUR rebound to $1.17 levels.

At the time of writing, the EUR was up 0.05% to $1.1649, with today’s stats and continued response to the ECB press conference to provide direction through the day.

For the Pound, economic data out of the UK is limited to June house price figures that are unlikely to have a material impact on the Pound, which is on the back foot once more following the EU’s latest rejection of proposals made by the British government on Brexit.

The markets and the BoE will now have to wait until mid-August for talks to resume, which comes after next week’s BoE monetary policy decision.

At the time of writing, the Pound was down 0.01% to $1.3108, with the Pound facing selling pressure on the lack of progress on Brexit, while finding support from an expected rate hike next week, though even the BoE hawks will be wondering what the final Brexit blueprint will look like.

Across the Pond, it’s a big day for the Dollar, with 1^st estimate, 2^nd quarter GDP numbers scheduled for release, with finalized July consumer sentiment figures also due out, though unlikely to be of influence focus being on U.S economic growth.

Forecasts are for the U.S economy to grow by 4.1% in the 2^nd quarter, which would certainly be a boost for the Dollar, with July data beginning to roll in suggesting that momentum remains going into the 3^rd quarter.

Shortly before the numbers, FOMC member Bullard is scheduled to speak, though we don’t expect the Dollar to respond, focus being on the GDP numbers.

At the time of writing, the Dollar Spot Index was down 0.09% to 94.7, with today’s stats the key driver, the GDP number needing to be on the right side of 4% to drive the Dollar, with the Oval Office there to chip in, if 2^nd quarter growth numbers impress.

For the Loonie, there are no material stats scheduled for release, leaving direction through the day in the hands of crude oil prices and sentiment towards NAFTA, with talk of a NAFTA deal by next month supporting the Loonie at the end of the week.

At the time of writing, the Loonie up 0.08% to C$1.3063 against the U.S Dollar.