Markets are generally pretty quiet today, with major pairs and crossovers trading within yesterday’s range, as well as within last week’s range. For now, the dollar is the strongest, followed by the pound and then the euro. The Australian and New Zealand dollars are the weakest. The yen and the Swiss franc are mixed with the Canadian.
Technically, the dollar’s rally this week isn’t making much progress so far. Even Gold’s recoil is relatively small. As long as 1754.13 support holds, upside from 1680.83 still favors recovery to 1807.66. Nonetheless, a firm break of 1754.13 will likely bring a reversal to retest the 1680.83 low. This could be accompanied by a stronger rise in the greenback.
In Europe, at the time of writing, the FTSE is up 0.16%. The DAX is up 0.53%. The CAC is up 0.24%. Germany’s 10-year yield is up 0.022 at 1.110. Earlier in Asia, the Nikkei fell -0.96%. Hong Kong’s HSI index fell -0.80%. China Shanghai SSE fell -0.46%. The Singapore Strait rose 0.33%. Japan’s 10-year JGB yield rose from 0.0139 to 0.200.
US initial jobless claims fell to 250,000, below expectations
U.S. initial jobless claims fell -2,000 to 250,000 in the week ending August 13, below expectations of 261,000. The four-week rolling average for initial claims fell – 2750 to 247k.
Continuing claims increased by 7,000 to 1,437,000 in the week ending August 6. The four-week rolling average for continuing claims rose from 13,000 to 1,413.
The Philly Fed manufacturing survey also released improved from -12.3 to 6.2 in August. Canada’s IPPI fell -2.1% m/m in July. The RMPI fell -7.4% mom.
ECB Schnabel: our concerns have not subsided after July’s 50 basis point hike
Isabel Schnabel, a member of the ECB’s executive board, said in an interview that there was “a strong indication that growth will slow down.” It would not rule out a technical recession in the euro zone, “especially if energy supplies from Russia are further disrupted”. Downside risks have also increased due to “additional supply-side shocks, caused by droughts or low water levels in major rivers.”
Regarding inflation, she said rising inflation rates are a “widespread development.” “Inflationary pressures are likely to be with us for some time; they won’t go away quickly,” she added. “I would not rule out that in the short term, inflation continues to rise…. it is very difficult to predict when inflation will peak.
Regarding the September meeting, Schnabel said “the concerns we had in July have not been alleviated.” In July, the ECB raised its interest rates by 50 basis points. “At the moment, I don’t think that perspective has fundamentally changed,” she added.
Eurozone CPI was finalized at 8.9% yoy in July, core CPI at 5.4% yoy
Eurozone CPI was finalized at 8.9% YoY in July, from 8.6% YoY in June. The CPI excluding energy, food, alcohol and tobacco was finalized at 5.4% year-on-year (vs. 4.9% year-on-year in June). The highest contribution to the euro zone’s annual inflation rate comes from energy (+4.02%), followed by food, alcohol and tobacco (+2.08%), services (+1 .60%) and industrial goods excluding energy (+1.16%).
The EU CPI was finalized at 9.8% yoy, down from 9.6% yoy in June. The lowest annual rates were recorded in France, Malta (6.8% each) and Finland (8.0%). The highest annual rates were recorded in Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%). Compared with June, annual inflation fell in six Member States, remained stable in three and rose in eighteen.
Australia lost -40.9k jobs, but unemployment rate fell to 3.4%
Employment in Australia contracted by -40.9k in July, much worse than expectations for growth of 25.0k. Full-time jobs fell by 86,900, while part-time jobs increased by 46,000.
The unemployment rate fell from 3.5% to 3.4%. The activity rate notably fell from 66.8% to 55.4%. Monthly hours worked in all jobs fell -16 million hours, or -0.8% month-on-month.
“July’s drop in unemployment reflects an increasingly tight labor market, including high vacancies and persistent labor shortages, resulting in the lowest unemployment rate since August 1974,” said Bjorn Jarvis, Head of Labor Statistics at ABS.
RBNZ Orr: monetary policy has been too accommodative for a while
RBNZ Governor Adrian Orr told a parliamentary committee: “Our underlying inflation is too high and that suggests that at some point monetary policy has been too accommodative for a while.”
“I have already apologized for the current level of inflation. I have already said that the Reserve Bank is party to this,” he added.
However, “the worst mistake we could make would be to fight deflation, unnecessary unemployment and economic collapse,” he said. “We ended up with the best problem – but it’s a problem – which is inflation, the underlying 4-6% inflation that we have to put back in the bottle.”
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 134.15; (P) 134.83; (R1) 135.74; After…
The intraday bias on USD/JPY remains neutral at this point. Overall, the corrective pattern from 139.37 will extend further. On the upside above 135.57 rebound will resume to retest 139.37 high. But a decisive break is not expected there this time. On the downside below 131.72 the fall will resume from 139.37 support at 130.38.
Overall, the fall from the medium-term high of 139.37 is seen as correcting the overall uptrend from 101.18 (2020 low). While a deeper decline cannot be ruled out, the outlook will remain bullish as long as the 55-week EMA (now at 122.70) holds. The long-term uptrend should resume at 139.37 at a later stage after the correction is over.
Economic Indicators Update
|01:30||USD||Job change Jul.||-40.9K||25.0K||88.4K|
|01:30||USD||Unemployment rate Jul.||3.40%||3.50%||3.50%|
|06:00||CHF||Trade balance (CHF) Jul.||3.58B||3.55B||3.80B||3.68B|
|09:00||USD||Eurozone CPI Y/Y Jul F||8.90%||8.90%||8.90%|
|09:00||USD||Eurozone CPI Core Y/Y Jul F||4.00%||4.00%||4.00%|
|12:30||BODY||Industrial Product Price M/M Jul||-2.10%||-0.80%||-1.10%|
|12:30||BODY||Commodity Price Index July||-7.40%||-3.90%||-0.10%|
|12:30||USD||Initial jobless claims (August 12)||250K||261K||262K||252K|
|12:30||USD||Philadelphia Fed August Manufacturing Survey||6.2||-6.2||-12.3|
|14:00||USD||Existing Home Sales Jul.||4.85M||5.12M|
|2:30 p.m.||USD||Natural gas storage||38B||44B|