Market Brief
This week’s economic calendar went from famine to feast yesterday as the Eurozone spun out better than expected German Unemployment figures (8.2% vs. 8.4% exp.), and rumours of good US employment figures to come spurred equities and other risky assets higher in the morning session (EURUSD rallied to 1.4671, crude to just shy of $68 and gold back above $1000/oz). The good news continued on the release of Norwegian Retail Sales; a gain of 0.3% M/M in Aug beat analyst expectations (0.2% exp.) and were quickly followed up by Norges Bank’s Gjedrem on the wires, stating that Norway’s interest rate was now “extraordinarily low”. This explicitly hawkish rhetoric added a catalyst to the USDNOK move, sending the pair skidding from 5.8400 to 5.7750. We continue to believe NOK will be one of the outperformers in the coming year as the Norges Bank (and the RBA with AUD, as noted in yesterday’s newsletter) looks to be on the cusp of raising interest rates, differentiating themselves from other G10 peers.
Eurozone CPI first estimate came out at -0.3% for Sep, which was lower than estimates of a 0.2% decline, but the figures did not detract from the broader USD weakness that was driving EURUSD moves. Meanwhile the Swiss KOF Leading Indicator convincingly beat estimates with a 0.85 print vs. 0.30 expected; USDCHF dipped to 1.0285, and EURCHF ground lower as far as 1.5077, but this only served to tee-up the pair before it rocketed higher to 1.5175 in a matter of seconds, and after a brief pause continued on to touch a high of 1.5240. There was no official confirmation that the SNB was the buyer of EURCHF, but it would take a massive player to effect a move of that magnitude, and the alignment of EURCHF levels prior to the move, coinciding with the ECB refinancing operation earlier in the day had a strong whiff of previous interventions.
Almost simultaneous with the alleged intervention was US ADP which marked the turning point of the day. The -254k print heavily missed analyst forecasts for -200k, but the prior month’s reading of -298k was revised upwards to -277k. This somewhat soured sentiment, and whilst the US GDP figures were slightly better than expected at -0.7% vs. -1.2% consensus, much of the improvement was already anticipated and priced in. The Chicago Purchasing Manager rounded off proceedings with a worse than expected 46.1 reading vs. expectations for an expansion of 52.0. This miss did not bode well for today’s broader ISM release, and subsequently the DXY benefitted from a wave of risk aversion (rallied from 76.60 to 76.94), the EURUSD reverted to flat on the day at 1.4585 and equity markets headed down. Commodities were spared the knock-on effect of USD strength after inventory releases out of the US revealed gasoline and distillate stocks were significantly lower than expected, sending crude surging off the lows to a high of $70.72.
Overnight, Asian equities have performed poorly after Japan’s Tankan Survey showed companies will cut capital spending by 10.8% this year. Hong Kong and China were closed for the holidays but both the Nikkei and Kospi are down around 1.5% which has given first advantage to the USD this morning, DXY trading at 76.80, crude back down to $69.90.
We have another busy economic calendar ahead with European PMI data and Unemployment Rate, Norwegian Unemployment, and out of the US; personal income, initial jobless claims, ISM manufacturing index, pending home sales, and construction spending. Focus will largely be on the US releases, in particular the ISM – the first few US data insights for September have been largely disappointing, and further downside surprises could likely portend a loss of risk appetite in the month ahead.
| Global Indexes | Current Level | % Change |
| Nikkei 225 Index | 9'978.64 | -1.53 |
| Hang Seng Index | 20'955.25 | 0 |
| Shanghai Index | 2'779.43 | 0 |
| FTSE 100 Index | 5'133.90 | -0.5 |
| DAX Index | 5'675.16 | -0.67 |
| SMI Index | 6'323.18 | 0.1 |
| S&P future | 1'050.90 | -0.19 |
| World Markets | Current Level | % Change |
| Gold | 1'005.36 | -0.23 |
| Silver | 16.55 | -0.6 |
| VIX | 25.61 | 1.67 |
| Crude wti | 69.85 | -1.08 |
| USD Index | 77.09 | 0.5 |
| Todays Calender | Estimates | Previous | Country / GMT |
| Swiss: Manufacturing PMI, index Sep | 51.3 | 50.2 | CHF/07:30 |
| E16 : Final Manufacturing PMI, index Sep | 49 | 49.0 P | EUR/07:58 |
| UK: Manufacturing PMI, index Sep | 50.1 | 49.7 | GBP/08:28 |
| E16: Unemployment rate, % (000s, sa) Aug | 9.6 (146) | 9.5 (167) | EUR/09:00 |
| US: Personal income, % m/m Aug | 0.1 (-2.7) | 0.0 (-2.4) | USD/12:30 |
| US: Personal consumption, % m/m Aug | 1.1 (-0.5) | 0.2 (-1.6) | USD/12:30 |
| US: PCE price index, % m/m (y/y) Aug | 0.4 (-0.9) | 0.0 (-0.8) | USD/12:30 |
| US: Initial jobless claims, thous (4wk ma) 26Sep | 527 (541) | 530 (554) | USD/12:30 |
| US: ISM manufacturing index Sep | 54 | 52.9 | USD/14:00 |
| US: Construction spending, % m/m Aug | -0.2 | -0.2 | USD/14:00 |
| US: Pending home sales, % m/m Aug | 1.0 (6.7) | 3.2 (12.1) | USD/14:00 |
Currency Tech
AUDUSD
R 2: 0.8940
R 1: 0.8860
CURRENT: 0.8800
S 1: 0.8770
S 2: 0.8675
USDCAD
R 2: 1.1100
R 1: 1.0990
CURRENT: 1.0730
S 1: 1.0660
S 2: 1.0590
EURJPY
R 2: 133.85
R 1: 132.10
CURRENT: 131.35
S 1: 130.60
S 2: 129.35
USDMXN
R 2: 13.655
R 1: 13.620
CURRENT: 13.565
S 1: 13.468
S 2: 13.325
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
