THE BIG PICTURE(bonuspips) 1) Once again the oil market was the center of attention. Oil moved higher during the US day on news that the UN inspectors in Syria would leave earlier than expected, which gave rise to thoughts that perhaps they had found something important. But later the International Energy Association (IEA) said that the global oil market is well supplied and doesn’t require the release of emergency stockpiles, and furthermore it “stands ready” to respond by releasing emergency stocks if there is a major disruption. The comments sent oil prices down sharply. Yet most EM currencies continued to fall, demonstrating that the rout in EM is not just temporary risk aversion. The dollar gained against all its G10 counterparts. 2) The European economic news yesterday was largely ignored while the US economic news moved the market. EUR/USD should have rallied during the European day based on the better-than-expected French and Italian economic sentiment and business confidence surveys (although German CPI was a bit lower than expected and unemployment rose a bit instead of falling) but there was no response. In addition, the ECB’s Nowotny said that forward guidance won’t remain in place forever. On the other hand, the better-than-expected US GDP revision did push EUR/USD down when it came out. This suggests to me that the market thinks the ECB is largely on hold while the Fed retains the ability to move and so the focus is much more on the US data than on the European data. Meanwhile, there was virtually no response in USD/JPY to the end-of-month onslaught of data from Japan, including a rise in headline inflation to +0.7% yoy from +0.2% (as expected). All eyes are on the Fed and the US data; remember that when you are trading. 3) Speaking of data, there are several Eurozone figures out today: unemployment for July is expected to remain unchanged at 12.1%, while economic confidence in August is expected to rise to 93.8 from 92.5 and CPI inflation for August is expected to slow to 1.4% yoy from 1.6%. German retail sales are expected to have risen 0.6% mom in July vs a revised -0.8% mom in June. In general such news might be EUR-supportive but as outlined above, I don’t expect much reaction. Canada’s 2Q GDP is forecast to have slowed to +1.6% qoq annualized from 2.5% in Q1, which could put further upward pressure on USD/CAD. In the US, growth in both personal income and spending are forecast to have decelerated in July: income to +0.2% vs 0.3%, spending to +0.2% from +0.5%. That could take some of the steam out of USD. On the other hand, the U of Michigan consumer confidence figure for August is expected to be revised up slightly to 80.5 vs the preliminary estimate of 80.0. But in general, I expect the oil market to be more important for FX than the indicators today.
Posted on: Fri, 30 Aug 2013 09:28:45 +0000
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