Good employment data in Australia
Hefty US data diary due in the afternoon
Brace yourselves… Sterling strengthened yesterday! I know… who would have thought it? I think we can all agree we thought those words would never be uttered again. But UK inflation picked up to 2.1% while German data was pretty dire and Eurozone industrial production shrank by 1.6%, so some of the funds that had deserted the Pound in favour of the Euro, seeped back again. That may not be a sustainable bounce but the iron is hot and it would appear rude not to strike it.
Sterling’s strength shrugged off the leader of the opposition’s threat to form a coalition of other opposition parties into an interim government after he has defeated Boris Johnson in a no-confidence vote. There are far too many trip-wires in that plan for it to be taken seriously right now. More importantly, UK retail sales will be published this morning. Tough high street conditions may well take the shine off the Pound.
Chinese slowdown fears still spook Asia Pacific markets
We heard overnight that Japanese industrial production contracted by 3.3% in July; not quite as bad as the market forecasts, but still evidence of the impact China’s slowdown is having.
We also heard that, in spite of all the negative talk around the Australian economy, that the unemployment rate held at 5.2% while 34,500 fresh full time jobs were added. That balanced the Australian Dollar up a tad.
An afternoon dominated by data from the US – watch the USD
This afternoon is dominated by US data. This includes sentiment indices from the manufacturing and consumer ends of the economy, industrial production, business inventories and the weekly fresh jobless claims. The general forecasts are for positive news. The US President has been tweeting up the US economy in his inimitable style. That included deriding the Federal Reserve for raising the base rate too fast and creating this situation in which bond yield curves have inverted. That means investors seeking a safe haven for their funds in the US Treasuries are actually buying assets they will lose money on. It is a predictable loss they can factor into their plans but at least their funds will be safe… well most of them, anyway. The other data we will see today is the measure of inbound funds into US Treasuries. That is forecast to be supportive of US Dollar strength, so be ready.
And it is Assumption Day, a religious holiday in Greece and Italy, amongst others. It is also Liberation Day in South Korea and Independence Day in India. The Asian markets are closing as I write and the Italian and Greek market flows are not normally sufficient to be missed.
Whether you are in your office, factory or workplace, or you are chilling at home, have a great Thursday.
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