The dollar rebound continues in the Asian session today and is generally trading at a high level. More noticeable weakness of the Aussie and the Euro, as both become weak in crossovers. Overall, risk sentiment is slightly negative, with Hong Kong stocks selling heavily, but the Nikkei remains resilient. The economic calendar is very light today and currency movements would likely follow wider markets. Nonetheless, inflation data from the United States, Canada and the United Kingdom could increase volatility later in the week.
Technically, the EUR / USD breakout of the 1.1792 support suggests that the rebound from 1.1663 has ended after the structural resistance at 1.1907 was rejected. We would be attentive to whether development is more of a release from dollar strength or euro weakness, or both. A break of 129.57 support on EUR / JPY would take a deeper fall to a low of 127.91. On the other hand, the USD / JPY could try to move up towards the resistance of 110.79 even if sideways trading continues. We will be keeping an eye on the interactions between the three.
In Asia, as of this writing, the Nikkei is down -0.34%. Hong Kong’s HSI is down -2.38%. China Shanghai SSE is down -0.38%. Singapore Strait Times is down -1.06%. The Japanese 10-year JGB yield is up 0.0025 to 0.048.
Fed Harker: I would like to start cutting back quickly to buy us the option
Philadelphia Fed Chairman Patrick Harker said in an interview with the Nikkei that he would like to start cutting back on asset purchases. He sees a “high risk” of rising inflation.
He said: âMy basic forecast is still to have inflation around 4% this year, ending this year, and then starting to fall back to 2% in the years 2022 and 2023. However, I see a high risk. that inflation can increase. â.
âI would like to start the reduction process soon, so that we can complete the reduction process, so if we need to increase the policy rate, we have the option to do so. And I think we have to buy ourselves that option, âhe added.
SNB Zurbruegg: negative interest rates still needed due to global situation
SNB Vice President Fritz Zurbruegg said in an interview with Sonntagszeitung over the weekend: “At the moment we need negative interest rates due to the global situation.” He warned that “if we were to raise interest rates now, the franc would appreciate sharply, economic growth would slow and unemployment would rise”. He also noted that the pick-up in inflation in Switzerland is “temporary”. In the medium term, “we expect it to stay low,” he said.
President Thomas Jordan remains on medical leave and there is no return date yet. Zurbregg said finding a successor for Jordan “is not a topic.” âThomas Jordan will resume his duties. “
The price of corporate goods in Japan fell to 5.5% year-on-year, wholesale inflation will remain under upward pressure
The Japanese companies’ goods price index edged down to 5.5% yoy in August. But it was close to 5.6% yoy in July, which was the highest reading since September 2008. Moreover, at 105.8, the index marked the highest level since 1982.
Shigeru Shimizu, head of the BoJ’s price statistics division, said: âAs the global economy continues to recover thanks to advances in vaccinations, wholesale domestic inflation will remain under upward pressure, although ‘There is uncertainty over the outlook due to a resurgence of infections. “
NZIER revised its inflation forecast up, NZD will remain high for years to come
In the September NZIER survey, the consensus forecast for 2021/22 GDP was revised down from 5.0% to 4.5%. But the 2022/23 GDP forecast for 2022/23 has been revised up from 3.7% to 4.5%. The revision likely reflects the impact of the current COVID-19 outbreak. GDP is expected to grow by 2.3% in 2023/24 (revised down to 2.6%), then recover to 2.7% in 2024/25.
Inflation forecasts have been sharply revised upwards from 2.1% to 3.5% in 2021/22, against 1.9% to 2.0% in 2022/23. It is unchanged at 2.2% in 2023/24 and is expected to be stable at 2.2% in 2024/25. NZIER said: âThe pressures on capacity continue to intensify in the New Zealand economy as acute labor shortages and supply chain disruptions related to COVID increase the pressures further. on costs. Strong demand has made it easier for companies to pass these costs on to customers by raising prices. “
The outlook for the NZD is mixed with a trade-weighted index revised downward in the short term. However, said NZIER, âthe expectation is that the currency will remain strong over the next few years,â as expectations of the RBNZ’s rate hike have improved the attractiveness of yields.
New Zealand business confidence ANZ rose to -6.8, showing resilience
In September’s preliminary reading, New Zealand business confidence ANZ rose to -6.8 from -14.2 in August. The outlook for own activity fell to 18.2 from 19.2. Looking in more detail, export intentions fell from 7.4 to 5.7. Investment intentions fell from 14.4 to 12.2. Hiring intentions fell from 17.0 to 14.7. Inflation expectations fell from 3.05 to 2.97.
ANZ said the report showed “resilience” despite the lockdown in Auckland, with most forward-looking business indicators performing well. ANZ said: “We looked at a split between Auckland and the rest of the country, but the differences were very small.”
âOverall, preliminary results from ANZ Business Outlook suggest that businesses can see the light at the end of the tunnel, even in Auckland. We can do it, he said.
Eyes on the CPI of the United States, Canada and the United Kingdom
Homes will turn to economic data this week. In particular, the United States, Canada and the United Kingdom will release the CPI, which may not start to peak in the spike in inflation. In addition, US retail sales and the Fed’s regional surveys, UK employment and retail sales, Australia employment and a bunch of data from China will be closely watched. Here are some highlights of the week:
- Monday: Japan’s BSI Manufacturing Index, PPI.
- Tuesday: Australia House Price Index, NAB Business Confidence; employment in UK; Swiss IPP; United States CPI; Manufacturing sales in Canada.
- Wednesday: New Zealand current account; Machine orders in Japan, tertiary industry index; China retail sales, industrial production, capital investment; UK PI, PPI; industrial production in the euro zone; Canadian CPI; Manufacturing of the State of the American Empire, import prices, industrial production.
- Thusday; New Zealand GDP, Australia employment; Japan’s trade balance; Euro zone trade balance; Canada Housing Starts, ADP Jobs Wholesale Sales; US retail sales Philly Fed survey, jobless claims, business inventories.
- Friday: New Zealand BusinessNZ manufacturing; UK retail sales; Euro zone current account Final CPI; The sentiment of the U of Michigan in the United States.
EUR / USD Daily Outlook
Daily Pivots: (S1) 1.1797; (P) 1.1824; (R1) 1.1838; Followingâ¦
The EUR / USD breakout of 1.1792 support indicates that the rebound from 1.1663 ended at 1.1908, after the rejection by key structural resistance at 1.1907. The move also dampened our initial bullish view. Intraday bias is back on the downside for a retest of 1.1663 support. A break out there will stretch the entire setup from 1.2348 to 1.1602 key support level. On the upside, minor resistance above 1.1850 will bring the bias to the upside for another test on the resistance at 1.1907 / 8.
Overall, the rise from 1.0635 is considered the third step in the pattern from 1.0339 (2017 low). Another rally remains in favor as long as the support at 1.1602 holds, to cluster resistance at 1.2555 thereafter, (38.2% retracement from 1.6039 to 1.0339 to 1.2516) . However, a sustained breakout of 1.1602 will support the upside from 1.0635 is over and make the medium term outlook bearish again. A deeper drop would be seen at 61.8% retracement from 1.0635 to 1.2348 to 1.1289 and below.
Update of economic indicators
|23:50||JPY||IPP Y / Y August||5.50%||5.60%||5.60%|
|23:50||JPY||BSI index of major manufacturing conditions Q3||7||-0.9||-1.4|
|6:00 p.m.||USD||Monthly Budget Statement (USD) August||-260.5B||-302.1B|