Market Brief
In Gold We Trust
The gold rush was on yesterday, with prices surging to $1020/oz as the USD weakened to its lowest levels in over a year, the DXY skimming 76.15. This coupled with higher than expected CPI readings in the Eurozone propelled EURUSD to its highest levels since Dec ’08 at 1.4737. Continued digression from safe-haven USD positions also precipitated new highs for AUD (0.8750) and NZD (0.7153), the two stand-out performers on the day. The infectious sense of optimism for the global outlook buoyed commodity markets and sent global equity markets higher virtually across the board.
US CPI came out a fraction above consensus (+0.4% M/M vs 0.3 exp.), but certainly nothing much in the figures is likely to have flustered policy-makers. Meanwhile , Industrial Production numbers for August surprised to the upside (0.8% M/M vs 06 exp.) and Capacity Utilisation also ticked higher, fuelling US stocks upwards as the Dow Jones traded at levels not seen since last October. Data out of Canada showed Manufacturing Data in Jul smashed consensus forecasts at 5.5% M/M (2.5 exp.), USDCAD ground lower to 1.0645 and we look for further downside today.
Asian equity markets have taken the baton with full zeal overnight, and further positives came from the BoJ who maintained rates at 0.1% but raised their assessment of the economy and saw signs of improvement in financial conditions. The bolstered outlook was credited to a rebound in exports; it will be interesting how rhetoric evolves considering Fujii’s comments yesterday about the merits of a strong yen.
Walking in this morning the USD is getting hammered, sharply lower against EUR and CAD in particular. The major event of the day will be the SNB rate announcement; although we are not looking for a change in the 3 month target from 0.25%, listen out for any explicit mention of the currency level – in particular, whether they address the continuing CHF-strength vs USD and GBP which have diverged from EURCHF since the central bank’s intervention.
UK Retail Sales for Aug will also highlight in the morning session, expect a modest increase of 0.1% M/M (0.4% prior). Later on, Canadian CPI for Aug (-0.6% Y/Y prev), will be followed by US Jobless Claims, Housing Starts and the Philadelphia Fed Mfg Index. It’s unlikely these data will prove significantly market-moving given the releases of the past couple of days but any positive numbers will likely be an excuse to continue to sell the USD.
| Global Indexes | Current Level | % Change |
| Nikkei 225 Index | 10'443.80 | 1.68 |
| Hang Seng Index | 21'887.11 | 2.26 |
| Shanghai Index | 3'060.26 | 2.02 |
| FTSE futures | 5'124.13 | 1.63 |
| DAX futures | 5'700.26 | 1.27 |
| SMI Index | 6'299.91 | 1.4 |
| S&P future | 1'068.00 | 1.69 |
| World Markets | Current Level | % Change |
| Gold | 1'021.98 | 0.46 |
| Silver | 17.64 | 1.39 |
| VIX | 23.69 | 1.15 |
| Crude wti | 72.55 | 0.06 |
| USD Index | 76.09 | -0.21 |
| Todays Calender | Estimates | Previous | Country / GMT |
| UK: Retail sales, % m/m (y/y) Aug | 0.1 (2.6) | 0.4 (3.3) | GBP/8:30 |
| E16: Trade balance, € bn (sa) Jul | 1.2 | 1 | EUR/9:00 |
| UK: CBI industrial trends, total orders, net bal | -50 | -54 | GBP/11:00 |
| Canada: CPI, %y/y Aug | -0.6 | -0.9 | CAD/11:00 |
| Canada: Bank of Canada core CPI, %y/y Aug | 1.6 | 1.8 | CAD/11:00 |
| SNB Interest rate announcement, % Q3 | 0.25 | 0.25 | CHF/12:00 |
| Canada: Leading Indicators, % m/m Aug | 0.5 | 0.4 | CAD/12:30 |
| US: Initial jobless claims, thous (4wk ma) 12Sep | 561 (565) | 550 (570) | USD/12:30 |
| US: Housing starts, k Aug | 594 | 581 | USD/12:30 |
| US: Philadelphia Fed mfg index Sep | 8 | 4.2 | USD/14:00 |
| US: Flow of Funds accounts Q2 | - | - | USD/16:00 |
Currency Tech
AUDUSD
R 2: 0.8860
R 1: 0.8800
CURRENT: 0.8745
S 1: 0.8715
S 2: 0.8595
USDCAD
R 2: 1.0770
R 1: 1.0720
CURRENT: 1.0630
S 1: 1.0610
S 2: 1.0525
EURJPY
R 2: 135.00
R 1: 134.40
CURRENT: 133.70
S 1: 131.05
S 2: 129.35
USDMXN
R 2: 13.570
R 1: 13.545
CURRENT: 13.183
S 1: 13.165
S 2: 13.110
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
