EURO
Versus the majority of its peers, the euro sold off during Tuesday’s trading sessions. The prevailing concerns, with regards to the inconclusive German Federal election on Sunday past, still appear to be weighing heavily on investor sentiment. Allied to this, Eurozone inflation is forecast to remain under the target, which the ECB had provisionally set at above 2%, in order for the central bank to consider raising the key interest rate, from its current floor of zero percent.
Despite earlier in September, the ECB president Mario Draghi committing to begin tapering the $60b a month asset purchase programme from October onwards, investors appear to remain unconvinced that if and when tapering begins, it will be sufficient enough to impact significantly on the value of the euro. Emmanuel Macron did nothing to lift the spirits of euro buyers, by suggesting major revisions to the Eurozone are necessary, at a time when its major economy is in the process of organising a coalition.
EUR/USD breached S2, closing the day out at circa 1.1795, down approx 0.4% on the day and reaching the lowest point in the month of September. From reaching 0.93 on August 29th, EUR/GBP has fallen significantly, falling to 0.8765, an approx ten week low and by circa 0.3% on the day. EUR/CAD fell through S2, as a commodity currency, the Canadian dollar rallied on Tuesday as oil failed to continue the global price rally of yesterday, caused by Turkey’s threats to cut off the pipeline supply through Kurdish regions.
TUESDAY’S KEY EUROZONE ECONOMIC DATA RESULTS
• Germany’s import price data came in right on forecast at 2.1% YoY, rising from 1.9% in July.
WEDNESDAY’S KEY EUROZONE FORECASTS
• There are no significant economic calendar events scheduled for Wednesday.
STERLING
There was little economic calendar data to effect the value of the UK’s pound during Tuesday’s sessions. After climbing by circa 7% in September, to a fifteen month high and rising above 1.36, GBP/USD has retreated by approx. 2% over the past three trading days, as the political uncertainty of Brexit, Moody’s lowering the country’s credit rating and uninspiring economic performance, has dragged down U.K. investor sentiment. The major currency pair fell by 0.2% on the day, to 1.3450.
Investors may be gauging that the BoE governor Mark Carney’s suggestion; that a base rate rise is imminent, may prove to be premature, as individual savings rates continue to collapse in the U.K., whilst outstanding consumer credit rockets. Analysts were pricing in a rise every second quarter, that now appears to be highly unlikely, given the state of the economy. Sterling did rise versus euro, and the Aussie and Kiwi dollars.
TUESDAY’S KEY U.K. DATA ECONOMIC RESULTS
• GBP BBA Loans for House Purchase. The result came in ahead of forecast, at 41, 807.
WEDNESDAY’S KEY U.K. FORECASTS
• GBP CBI Retailing Reported Sales (SEP).
• GBP CBI Total Dist. Reported Sales (SEP).
U.S. DOLLAR
The dollar rose versus both euro and sterling, not necessarily as a consequence of dollar strength, but more due to the perceived weakness in both the European currencies. USD/JPY rose by circa 0.2% on the day, to finish just short of R1, at approx. 112.24. USD/CHF, in its customary negative correlation versus EUR/USD, rose by circa 0.1% to 0.9685. The tensions versus North Korea appeared to subside, as both Russia and USA diplomats stressed diplomacy was the route forward. Equities in U.S. markets and the dollar gave back some of the daily gains as Janet Yellen, chair of the Fed, declared that the rate rises and quantitative tightening discussed at the FOMC meeting last week, would not be held back.
TUESDAY’S KEY U.S.A DATA ECONOMIC RESULTS
• USD S&P/Case-Shiller Composite-20 (YoY) (JUL), 5.81%, beating forecast of &.7%.
• USD New Home Sales (MoM) (AUG), -3.4%, missing forecast of 2.5% growth.
• USD Consumer Confidence (SEP), 119.8, missing forecast of 120.
WEDNESDAY’S KEY U.S. FORECASTS
• USD Durable Goods Orders (AUG P). Forecast is for growth of 1%, after the shock 6.5% fall in July.
• USD Pending Home Sales (MoM) (AUG). The prediction is for a -0.5% fall, an improvement above the -0.8% recorded in July.
GLOBAL EQUITY MARKET SUMMARY
• DJIA down 0.05%
• SPX up 0.01%
• ASX down 0.22%
• DAX up 0.08%
• FTSE down 0.21%
• CAC up 0.03%
• NIKKEI 225 down 0.33%
OTHER KEY ECONOMIC DATA FOR WEDNESDAY SEPTEMBER 27th
• CAD Speech – Stephen S. Poloz, Governor.
• NZD Reserve Bank of New Zealand Rate Decision (SEP 28). Current rate 1.75%, no change is expected.
