Wholesale Price Inflation and Trade Noise Keep the USD in the Spotlight

Earlier in the Day:

Economic data released through the Asian session was on the lighter side this morning, with key stats being limited to 3^rd quarter BSI large manufacturing conditions figures out of Japan and September’s Westpac Consumer Sentiment numbers.

For the Japanese Yen, the BSI Large Manufacturing Conditions (Q3) rose from -3.2 to 6.5 for the 3^rd quarter, coming up short of a forecasted increase to 8.0.

There was a relatively muted response by the Yen as the markets prepare for U.S – Japan trade talks and consider the implications of Chinese sanctions on the U.S.

The Japanese Yen moved from ¥111.592 to ¥111.583 against the U.S Dollar upon release of the figures, before rising to ¥111.48 at the time of writing, up 0.13% for the session.

For the Aussie Dollar, the Westpac Consumer Sentiment index fell by 3% in September, following on from a 2.3% fall in August, the decline in consumer confidence being attributed to the recent political turmoil that led to the ousting of Australian Prime Minister Turnbull and recent mortgage rate hikes by Australian lenders.

Household disposable incomes have been an issue for the RBA for some time and the recent upward trend in mortgage rates will add further pressure on disposable income that may well hit domestic consumption should wage growth not accelerate.

In spite of the recent downward trend that has seen consumer confidence hit its lowest levels since last November, the index remains above 100 and higher year-on-year, though at 100.5, optimists are barely outnumbering pessimists.

The Aussie Dollar moved from $0.71035 to $0.70997, upon release of the figures, before easing to $0.7098 at the time of writing, down 0.29% for the session.

Elsewhere, the Kiwi Dollar was down 0.26% to $0.6509 at the time of writing, yesterday’s retail sales figures providing little cover as the markets continue to focus on the ongoing trade spat between the U.S and China. China’s latest request to the WTO for a roll out of sanctions on the U.S will have the markets edgy, Trump more than capable of responding with even more threats.

In the equity markets, it was a bad start to the day in spite of the overnight gains in the U.S, with the Nikkei and ASX200 down 0.50% and by 0.04% respectively. The Hang Seng and CSI300 continued to shed value, the pair down 0.45% and by 0.61% respectively, at the time of writing. With retail investors making up the lion share of the two markets, herd mentality could see significantly heavier losses before any steadying, trade chatter and fears of a major slowdown in the Chinese economy weighing heavily.

The Day Ahead:

For the EUR, economic data scheduled for release through the day includes finalized August inflation figures out of Spain and the Eurozone’s industrial production numbers for July.

With finalized inflation figures forecasted to be in line with prelim, softer than expected industrial production figures would weigh on the EUR, with Germany’s July industrial production having slumped by 1.1% in July, according to figures released late last week.

Outside of the data, market risk appetite will continue to be an influence, while we can also expect some influence ahead of tomorrow’s ECB policy decision and all-important press conference.

Trade war jitters have provided demand for the Dollar, though offset by the risk off sentiment across the broader markets that has provided some upside for the EUR as the Asian and emerging markets continue to struggle.

At the time of writing, the EUR was down 0.17% to $1.1586.

For the Pound, it’s a quiet day on the data front, with no material stats scheduled for release out of the UK. With the announcement of Carney extending his tenure by less than a year weighing on the Pound on Tuesday, focus will likely return to Brexit chatter.

At the time of writing, the Pound was down 0.21% to $1.3006, with there being a need for some caution as negotiations continue.

Across the Pond, August wholesale inflation figures are scheduled for release that will have an influence on the Dollar, any hints of a pickup in inflation supporting a September and December rate hike, as the FED looks to build in a rate buffer ahead of the next economic slowdown.

Outside of the data, the markets will be looking for Trump to respond to Beijing’s request to the WTO for permission to roll out sanctions on the U.S, while FOMC members Bullard and Brainard are scheduled to speak later in the day, Brainard of greater influence as a voting member this year.

At the time of writing, the Dollar Spot Index was down 0.07% to 95.185.

For the Loonie, it’s another quiet day on the data front, to leave progress on NAFTA talks front and centre, any talk of an imminent agreement a positive for the Loonie.

At the time of writing, the Loonie was down 0.03% to C$1.3071 against the U.S Dollar.