Daily Analysis for Thursday, Aug 9th
6.00 pct. in the UK Should be for Certain
The UK quarterly inflation report revealed nothing new to us and a September rate hike seems very likely. The USD went lower despite the Fed still views inflation as their main concern.
MAJOR HEADLINES – PREVIOUS SESSION
- SW Headline CPI July, out at -0.2% in line with exp. YoY out at 1.9% in line with exp.
- SW Core CPI july, out at -0.3% vs -0.2% exp. YoY out at 1.0% in line with.
- SW Budget Balance July, out at 12.4B vs a prior reading of -4.6B.
- NO Industrial production June, out at -4.0% vs a prior reading of -4.1%. YoY out at -8.6% vs a prior reading of -3.9%.
- NO Ind Prod Manufacturing June, out at -1.0% vs 0.2% exp. YoY out at 5.0% vs 6.8% exp.
- GE Industrial Production June, out at -0.4% vs 0.5% exp. YoY out at 5.1% in line with exp.
- US Non-farm Productivity Q2, out at 1.8% vs 2.0% exp.
- US Unit Labor Costs Q2, out at 2.1% vs 1.8% exp.
- US FOMC leaves rates unchaged at 5.25% as expected.
- US Consumer Credit June, out at $13.2B vs $5.8B exp.
- US ABC Consumer Confidence Aug 5, out at -9 vs a prior reading -8.
- AU RBA hike rates 25 bps to 6.50% as exp.
- AU House Price Index Q2, out at 6.50% in line with exp. YoY out at 9.2% vs a prior reading of 8.6%.
- AU Home Loans June, out at 1.1% vs 2.0% exp.
- AU Investment Lending June, out at 14.8% vs a prior reading of 8.9%.
- JN Machine Orders June, out at -10.4% vs -1.1% exp.
- JN Broad Liquidity (YoY) July, out at 4.2% vs 3.6% exp.
- JN Bank Lending incl Trusts (YoY) July, out at 0.3% vs 0.5% exp.
THEMES TO WATCH – UPCOMING SESSION
Overnight News Bullets
- GE Trade Balance June, out at 16.5B vs 17.8B exp.
- GE Current Account June, out at 16.6B vs 12.0B exp.
- US Mortgage Applications Aug 3, out at 8.1% vs a prior reading of -0.3%.
- US Wholesale Inventories June, out at 0.5% vs 0.4% exp.
- US Crude Inventories Aug 3, out at -3623KJ vs -3844K exp.
- NZ Unemployment Rate Q2, out at 3.6% vs 3.7% exp.
- NZ Employment Change Q2, out at 0.7% va´s 0.3% exp. YoY out at 1.5% vs 1.1% exp.
- AU Unemployment Rate July, out at 4.3% vs 4.4% exp.
- AU Employment Change July, out at 21.8K vs 250.K exp.
- AU Participation Rate July, out at 65% in line with exp.
- JN Net Stocks Investment Aug 3, out at 237.0B vs a prior reading of 291.1B.
- JN Net Bonds Investment Aug 3, out at 1357.4B vs 617.3B.
Market
- FX: Carry trades continue to rebound with remaining high through NY. Dollar weaker with EURUSD breaking above 1.3800.
O/N Data Heat map:
| EU | US | JP | UK | SZ | AU | CA | NZ | NO | SE | FR |
| + | + | 0 | 0 | + | 0 | + | 0 | 0 | 0 |
Calendar
Today's Highlights:
Time (GMT) Region Release Consensus 08:00 SW AMU Unemployment Rate 3.7% 08:00 NO Retail Sales MoM/YoY (Jun) 0.5%/6.7% 08:30 UK Visible Trade Balance (Jun) -£6900 12:15 CA Housing Starts (Jul) 223.5K 12:30 US Initial/Continuing Claims (weekly) 310K/2520K 12:30 CA New Housing Price Index (Jun) 0.8% 14:30 US EIA Natural Gas Storage Change 51 23:50 JN Domestic CGPI MoM/YoY (Jul) 0.6%/2.1%
This and Next Week’s Highlights:
Date Region Release 10 Aug FR Industrial Production, Manufacturing Production, Central Govt. Balance 10 Aug JN Industrial Production, Capacity Utilization, Bankruptcies, Consumer Confidence, Consumer Confidence Households 10 Aug NO CPI, CPI Core, Producer Prices incl.Oil 10 Aug CA Unemployment Rate, Net Change in Employment 10 Aug US Import Price Index, Baker Hughes U.S. Rig Count, Monthly Budget Statement 10 Aug IT GDP, CPI 12 Aug JN GDP, Current Account, Trade Balance 13 Aug UK PPI, DCLG House Prices, Leading Indicators, Coincident Indicator 13 Aug US Retail Sales, Business Inventories 13 Aug NZ Retail Sales 14 Aug GE GDP 14 Aug FR GDP, CPI 14 Aug UK CPI, RPI 14 Aug E-Z GDP, Industrial Production 14 Aug US Trade Balance, PPI 14 Aug NZ PPI
What's going on?
- The BoE inflation report was more hawkish then what the market expected and the Pound rallied across the board. In our view 6.00% is a sure thing as Mr King suggested that 5.75% was not enough to cover a 2.0% inflation target.
- Unemployment data from NZ and AU was strong and with lack of real important data from the US until next week, then expect relatively low volatility and more recovery in carry trades.
- Dollar remained soft through yesterday's trading sessions, with EURUSD breaking 1.3800 and Cable taking out 2.0335-45 resistance suggest the pair remains a buy on dips in Europe.
FX
| EUR | USD | JPY | GBP | CHF | AUD | CAD | NZD | NOK | SEK | PLN |
| + | - | - | + | 0 | + | 0 | + | + | 0 | 0 |
FX Trading Strategies
| Pair | Supp. | Resis. | Comments |
| EURGBP | 0.6720 | 0.6815 | The BoE inflation report was more hawkish than investors expected. We expect this to spill-over for more GBP strength in Europe. We have placed an order to sell at 0.6769 offer, stop bid at 0.6781, target left open. |
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