Emerging market currencies in focus

Notes/Observations

- Emerging markets currencies continue to be in turmoil (Russia Ruble at 2-year lows following new sanctions; Turkish Lira at fresh record lows following meeting in DC with govt officials)

- Philippines Central bank delivers strong rate action with 50bps hike to combat inflation

Asia:

- New Zealand Central Bank (RBNZ) left its Official Cash Rate unchanged at 1.75% (as expected); outlook very balanced and in no rush to move rate. Very pleased with the way the exchange rate had been behaving over recent quarters with the Kiwi currency being very close to fair value.

- China July CPI Y/Y: 2.1% v 2.0%e (matched highest reading since March)

Europe:

-Italy Dep PM Di Maio (Five-Star party leader) stated that was seeking confrontation with EU, not a clash and vowed to repeat tough tactics in budget battle with EU

Americas:

- US State Department announces Russian sanctions related to chemical agent used in UK attack; to take effect around Aug 22nd. Reports circulated that new US sanctions 1st tranche on Russia would ban licenses for export of sensitive national security goods to Russia and later could downgrade diplomatic relations suspend Aeroflot flights to US, cut of nearly all exports, imports

- Canada PM Trudeau stated that would continue to engage with Saudi Arabia, but would also continue to speak strongly about human rights

Energy:

- Saudi Energy Min Al-Falih:: Saudi oil supplies are not subjected to political considerations; dispute with Canada will not impact Aramco clients in Canada

Economic Data:

- (NL) Netherlands Jun Manufacturing Production M/M: -0.1 v +0.4% prior; Y/Y: 3.4% v 3.2% prior, Industrial Sales Y/Y: 6.7 v 5.9% prior

- (CH) Swiss July Unemployment Rate: 2.4% v 2.4%e, Unemployment Rate (seasonally Adj): 2.6% v 2.6%e

- (DK) Denmark Jun Current Account Balance (DKK): 11.3B v 10.4B prior; Trade Balance: 7.4B v 5.1B prior

- (FI) Finland Jun Preliminary Trade Balance: €0.0B v -€0.2B prior

- (NO) Norway Jun Credit Indicator Growth Y/Y: 5.8% v 5.9%e

- (JP) Japan July Preliminary Machine Tool Orders Y/Y: 13.0% v 11.4% prior

- (CZ) Czech July CPI M/M: 0.2% v 0.1%e; Y/Y: 2.3% v 2.3%e

- (HU) Hungary Jun Preliminary Trade Balance: €1.1B v €0.6B prior

- (SE) Sweden July Average House Prices (SEK): 2.754M v 2.9803M prior

- (PH) Philippines Central Bank (BSP) raised its Overnight Borrowing Rate by 50bps to 4.00%; as expected (3rd straight rate hike)

- (GR) Greece July CPI Y/Y: 0.9% v 1.0% prior; CPI EU Harmonized Y/Y: 0.8% v 1.0% prior

- (GR) Greece Jun Industrial Production Y/Y: 1.2% v 1.7% prior

- (GR) Greece May Unemployment Rate: 19.5% v 20.0% prior

- (IS) Iceland Q2 Unemployment Rate: 3.6% v 2.9% prior

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 -0.2% at 388.8, FTSE -0.6% at 7729, DAX 0.0% at 12633, CAC-40 -0.2% at 5492, IBEX-35 0.0% at 9755, FTSE MIB +0.0% at 21801, SMI -0.3% at 9149 S&P 500 Futures 0.1%]

Market Focal Points/Key Themes: European Indices trade mainly lower after a mixed Asian session and flat US futures after China confirmed retaliatory tariff on $16B of US goods. On the corporate front Adidas outperforms after strong earnings, with Orsted another outperformer after an acquisition and earnings. Other risers include Stroeer, Bpost and Evotec after reporting resuls. Merck is a notable faller in Germany after missing on earnings, with TUI, Adecco and G4S other notable fallers after earnings. Looking ahead notable earners include Liberty Global, Norwegian Cruise Line, Maximus and Viacom.

Movers

-Consumer Discretionary Adidas [ADS.DE] +7.7% (Earnings), TUI [TUI1.DE] -9.4% (Earnings), Stroeer [SAX.DE] -1.1% (Earnings) , Pandora [PNDORA.DK] -0.4% (Earnings), Adecco [ADEN.CH] -2.2% (Earnings). Card Factory [CARD.UK] -10% (Earnings), G4S [GFS.UK] -6.5% (Earnings)

-Industrials Bpost [BPOST.BE] +8.6% (Earnings), Jenoptik [JEN.DE]-1.5% (Earnings)

-Healthcare Evotec [EVT.DE] +2.5% (Earnings), BTG [BTG.UK] -4.1% (Receives not-approvable letter from the US FDA for ELEVAIR)

Speakers

- ECB Economic Bulletin noted that indicators pointed to broad-based growth at a somewhat slower pace compared to 2017 levels. Downside risks to global economy had intensified

- Italy PM Conte said to see time frame to complete flat tax and citizen income as a five year process

- RBNZ Assistant Gov McDermott: Chances of a rate cut had increased. Wanted the market to understand that a rate hike was off the table as it needed to see core inflation above 2% for any rate hike

- Russia might use counter-sanctions law to respond to the US

- Philippines Central Bank Policy Statement noted that Inflation expectations remained elevated; reiterated it was prepared to take all necessary policy actions needed to address inflation threat. Domestic economy could absorb further monetary tightening

- Japan rating agency JCR raised Japan sovereign outlook to Stable from Negative

- North and South Korea to hold high level talks on Monday, Aug 13th to discuss Moon-Kim summit

Currencies

- USD continued to muster up some strength

- EUR/USD holding below the 1.16 level with dealers eyeing a massive Head&shoulder pattern on the daily charts with the neckline pegged at 1.15. A break opens the door for a possible test to 1.05 (10-handle move).

- The GBP currency remain softer on a ‘no-deal’ Brexit concerns as the pair tested 1.4850 area for fresh 11-month lows

- USD/JPY pair was steady around the 111 level ahead of US-Japan trade talks that begin in Washington later today.

- NZD currency was weaker after a dovish RBNZ policy statement in which the outlook was very balanced and was in no rush to move on rates rate. RBNZ Assistant Gov McDermott added that the chances of a rate cut had increased and wanted the market to understand that a rate hike was off the table. NZD/USD lower by 0.7% at 0.6650 area - TRY currency continued to hit record lows against the USD with the pair approached the 5.45 area after Turkey officials reportedly were not committed to release of US pastor Brunson from house arrest.

- RUB currency was weaker by 1% to test above the 66.20 area fpr 2-year lows following US State Department announcement on Russian sanctions related to chemical agent used in UK attack

Fixed Income

- Bund Futures trades at 162.36 up 18 ticks as European stocks trade lower. A move back above 162.75 would target 163.47 then 163.63, with a move below 161.75 targeting 161.45 then 160.45.

- Gilt futures trades at 123.02 up 14 ticks and continuing to hover around 123 with continuing upside targeting 123.18 then 124.44, with a move lower seeing initial support at 122.23 then 121.85.

- Thursday 's liquidity report showed Wednesday's excess liquidity rose from €1.902T to €1.903T. Use of the marginal lending facility fell from €90M to €35M.

- Corporate issuance saw Volkswagen and Starbucks come to the primary market

Looking Ahead

- (US) US-Japan trade talks begin in Washington

- (MX) Mexico July ANTAD Sames-Store-Sales (SSS) Y/Y: No est v 7.9% prior

- (UR) Ukraine July CPI M/M: -0.1%e v 0.0% prior; Y/Y: 9.7%e v 9.9% prior

- 05:30 ((HU) Hungary Debt Agency (AKK) to sell 12-month Bills

- 06:00 (IE) Ireland July CPI M/M: No est v 0.1% prior; Y/Y: No est v 0.4% prior

- 06:00 (IE) Ireland July CPI EU Harmonized M/M: No est v 0.1% prior; Y/Y: No est v 0.7% prior

- 06:00 (PT) Portugal Jun Trade Balance: No est v -€1.1B prior

- 07:00 (CZ) Czech Central Bank to comment on CPI data - 08:00 (BR) Brazil CONAB Crop Report

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (CA) Canada July Annualized Housing Starts: 219.0Ke v 248.1K prior

- 08:30 (US) Initial Jobless Claims: 220Ke v 218K prior; Continuing Claims: 1.73Me v 1.724M prior

- 08:30 (US) July PPI Final Demand M/M: 0.2%e v 0.3% prior; Y/Y: 3.4%e v 3.4% prior

- 08:30 (US) July PPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: 2.8%e v 2.8% prior

- 08:30 (US) July PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.3% prior; Y/Y: No est v 2.7% prior

- 08:30 (CA) Canada Jun New Housing Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 0.7%e v 0.9% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (MX) Mexico July CPI M/M: 0.5%e v 0.4% prior; Y/Y: 4.8%e v 4.7% prior, CPI Core M/M: 0.3%e v 0.2% prior

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 3rd: No est v $459.5B prior

- 10:00 (US) Jun Final Wholesale Inventories M/M: 0.0%e v 0.0% prelim; Wholesale Trade Sales M/M: 0.2%et v 2.5% prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:30 Fed’s Evans (non-voter, dove)

- 13:00 (US) Treasury to sell 30-Year Bonds

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 2.75%

- 19:50 (JP) Japan Q2 Preliminary GDP Q/Q: +0.3%e v -0.2% prior; GDP Annualized Q/Q: +1.4%e v -0.6% prior