The USD Makes an Early Move, with Trade Talks and Stats in Focus

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, with stats limited to prelim August manufacturing PMI numbers out of Japan.

For the Japanese Yen, the prelim manufacturing PMI rose from 52.3 to 52.5, coming in ahead of a forecasted rise to 52.4.

Looking across the sub-indexes, an acceleration in both input and output price growth was a positive from a BoJ perspective, with recent stats having showing signs of inflationary pressures beginning to build.

Other positives included a pickup in new orders, with backlogs rising at a faster pace, which should support labour market conditions, while new export orders slipped in August. The fall in new export orders will be of concern and weighed on business confidence, with optimism being less positive in August, as manufacturers brace for planned trade negotiations with the U.S next month. Positive sentiment eased to its lowest since November 2016 according to the latest Markit survey.

The Japanese Yen moved from ¥110.641 to ¥110.709 against the Dollar, upon release of the figures, before easing to ¥110.86 at the time of writing, down 0.27% for the morning.

Elsewhere, the Aussie Dollar was down 0.86% to $0.7285, with the Kiwi Dollar down 0.42% to $0.6669, the FOMC meeting minutes doing the damage through the early part of the day, as the markets respond to the prospects of a September rate hike.

In the equity markets, a pullback in the Japanese Yen provided early support to the Nikkei, which was up 0.18% at the time of writing, while the ASX200 was down 0.31% in the early part of the day.

For the CSI300 and Hang Seng, it was also red in the early part of the day, the pair down 0.14% and 0.62% respectively as the markets respond to the FOMC meeting minutes, an anticipated September rate hike and the planned roll out of tariffs on another $16bn worth of Chinese goods. Some hope of avoiding the tariffs eased the pain for the CSI300, as the U.S and China enter day two of preliminary trade talks.

The Day Ahead:

For the EUR, it’s a busy day on the data front, with key stats scheduled for release through the morning including prelim August private sector PMI numbers out of France, Germany and the Eurozone, September consumer sentiment figures out of Germany and the Eurozone and the release of the ECB monetary policy meeting minutes.

Focus will be on the minutes, while Germany’ consumer confidence and manufacturing PMI will be of greatest influence on the data front.

At the time of writing, the EUR was down 0.37% to $1.1554, with the key drivers through the day being the ECB minutes and stats out of Germany.

For the Pound, with no material stats scheduled for release, Brexit will remain the area of focus, a lack of key stats through the week allowing the Pound to recover from $1.27 levels.

At the time of writing, the Pound was down 0.31% to $1.2871, with Brexit chatter the key driver through the day.

Across the Pond, economic data scheduled for release out of the U.S is on the heavier side, with key stats including prelim August private sector PMI numbers, the weekly jobless claims figures and July new home sales.

While focus tends to be on the service sector PMI and new home sales figures, we will expect the markets to also show more sensitivity to the manufacturing PMI, with any particularly disappointing manufacturing number likely to be an early warning of the adverse effects of the ongoing trade war between the U.S and China.

Outside the stats, the U.S is scheduled to roll out 25% tariffs on an additional $16bn worth of goods from China that will have an impact should the administration proceed. Noise from the Oval Office will also need to be considered, any updates from prelim trade talks with China also there for consideration, along with noise over the ongoing investigations by Robert Mueller.

At the time of writing, the Dollar Spot Index was up 0.24% to 95.414, with the FOMC meeting minutes providing early support ahead of busy day the Dollar.

For the Loonie, there are no material stats scheduled for release through the day, with the news wires pointing to a likely conclusion to the Mexico-U.S talks later today that would bring Canada back to the table.

At the time of writing, the Loonie was down 0.19% to C$1.3022, with NAFTA chatter the key driver.