SNB likely intervening. GBPUSD bumps up against key 1.6130 resistance, retreats.


MAJOR HEADLINES – PREVIOUS SESSION

  • US Weekly ABC Consumer Confidence steady at -46 vs. -45 expected and -46 last week

  • UK Sep. GfK Consumer Confidence rose to -16 vs. -24 expected and vs. -25 in Aug.

  • Japan Sep. Nomura/JMMA Manufacturing PMI out at 54.5 vs. 53.6 in Aug.

  • Japan Aug Industrial Production rose 1.8% MoM and fell -18.7% YoY, vs. 1.8%/-18.8% expected, respectively

  • Australia Aug. Retail Sales rose 0.9% MoM vs. 0.5% expected and vs. -0.9% in Jul.

  • Australia Aug. Building Approvals fell -0.1% vs. +2.% expected

  • New Zealand Sep. NBNZ Business Confidence out at 49.1 vs. 34.2 in Aug.

  • China Sep. HSBC Manufacturing PMI out at 55.0 vs. 55.1 in Aug.

  • Japan Aug. Housing Starts fell -38.3% YoY vs. -31.7% expected

  • Germany Sep. Unemployment Change out at -12k vs. +20k expected

  • Germany Sep. Unemployment Rate fell to 8.2% vs. 8.4% expected

  • Norway Aug. Retail Sales out at +0.3% MoM vs. +0.2% expected

  • EuroZone Sep. CPI estimate fell -0.3% YoY vs. -0.2% expected and -0.2% in Aug.

  • Switzerland Sep. KOF Swiss Leading Indicator rose to 0.85 vs. 0.3 expected and -0.04 in Aug.

  • US Sep. ADP Employment Change fell to -254k vs. -200k expected and -277k in Aug.

  • Canada Aug. Industrial Product Price rose 0.5% MoM vs. 0.4% expected

  • Canada Jul GDP out at 0.0% MoM vs. +0.5% expected

  • US Q2 GDP revised up to -0.7% (annualized) vs. -1.2% expected and -1.0% originally estimated


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • US Sep. Chicago PMI (1345)

  • US Sep. NAPM Milwaukee (1400)

  • US Fed's Lockhart to speak (1430)

  • US Weekly DOE Crude Oil Inventories (1430)

  • US Fed's Kohn to Speak (1635)

  • EuroZone ECB's Orphanides to Speak (1635)

  • Australia AiG Performance of Manufacturing Index (2330)

  • Japan Q3 Tankan Large Manufacturer's Index (2350)

  • Japan Aug. Retail Trade (2350)

  • China Sep. PMI Manufacturing (0100)

Market Comments:

The USD turned sharply weaker again in today's European session, driven by still elevated risk appetite and, most likely, strong month-end fixing flows as well. AUD,CAD and GBP were the over-achievers, all notching sharp gains vs. the greenback at their highs on the day. AUD punctured the 0.8800 for the first time since last August.
EURUSD was up trying to punch through the 1.4650/80 zone of resistance and GBPUSD pushed at 1.6130 resistance before both retreated rather sharply after the US ADP number. The worse than expected US ADP payrolls report set up a minor downtick in risk appetite as the market awaits the more influential Nonfarm Payrolls report on Friday. A positive GDP revision may have also come to the greenback's aid today, as possible what appears to be a large round of SNB intervention in CHF vs. the USD and the EUR.

US Confidence Survey divergence - explained?

We have noted the wide divergence in the monthly US Conference Board Consumer Confidence data and the weekly ABC Consumer Confidence survey and have decided to investigate a bit further in an attempt to understand their divergence of late, as these surveys normally track each other very closely, with the weekly survey being slightly leading due to its more frequent updates. The explanation looks relatively obvious: the weekly survey stresses the consumer's present situation more than the monthly survey, which is made up of equally weighted "present situation" and 6-month expectation components. The weekly ABC survey asks consumers the following three questions:

1)Would you describe the state of the nation's economy these days as excellent, good, not so good, or poor?

2) Would you describe the state of your own personal finances these days as excellent, good, not so good, or poor?

3) Considering the cost of things today and your own personal finances, would you say now is an excellent time, a good time, not so good a time, or a poor time to buy the things you want and need?

Thus, we see that two-thirds of the questions deal with the consumer's present situation, while the third only measures expectations by questioning how willing a person is to take on the risk of further financial commitments. Both surveys are negatively correlated with the employment rate, which must fall very far and very fast to sustain further improvement in confidence (and end demand) and get all confidence surveys headed higher.

UK Confidence

UK Confidence also rose sharply, with especially sharp improvements in the "Economic situation for the next 12 months" category and "climate for major purchases". The credit easing of the last year is making its mark, apparently, as we now look to see how well it can be sustained as central banks ease up on the helicopter cash drops in the coming months. The pound was sharply higher and GBPUSD powered through the 1.6000 and has already made its first attempt at the major 1.6110 resistance. The 0.9080 level in EURGBP is also interesting to watch as this was the previous high before the panicky extension in the rally late last week and into Monday.
The action today may be a poor indicator of future direction as much of the flow today is likely fix-related.

US ADP payrolls - any indicator for Friday's NFP?

The past six ADP reports have had mixed success in predicting the Nonfarm Payrolls numbers.
Of those six, only the May report undershot the NFP number (by 48k), while June, August and September showed much larger drops in payrolls than the NFP data, by 187k, 124k, and 82k respectively.
If this pattern holds, the payrolls report might have a chance of an upside surprise in the -125k-150k range, although the number would have to come in the higher part of that range or better to be a significant positive surprise, with current expectations at -180k (though expectations will move slightly south after today's ADP release.)

JPY today

The action in the JPY crosses was relatively civilized today considering the noise level surrounding today's end of month/half-year. Now we watch the action in the coming days to see if the JPY rally is sustained after USDJPY hammered out its 88.25 low on a spike. 90.40 is the key upside resistance.

Chart: GBPUSD

GBPUSD made a classic test of the old low, new resistance level at 1.6110 today - a pivotal area for the pair.

GBPUSD