Fed leader Jerome Powell inspired a fresh round of dollar offerings, like his Jackson Hole speech, which continues to this day. Stronger than expected personal income and expenses as well as core inflation reading provide little support. Although at present the decline appears to be mainly centered on commodity currencies, particularly Aussie and Kiwi. Yen is closely following as the third strongest and rebounder over the resignation of Prime Minister Shinzo Abe. The European majors are mixed at the moment.
Technically, 105.10 support in USD / JPY is now in focus with today’s sharp reversal. Pause gives retest of 104.18 low. Both EUR / JPY and GBP / JPY are holding above 124.31 and 138.24 support, respectively, staying long-term expected bullish despite today’s withdrawals. AUD / JPY is also dipping sharply after the outbreak of this week’s triangle. We will maintain that 76.78 support in AUD / JPY is the first line of defense. Beef driving is safe as long as this level lasts.
In Europe, the FTSE is currently up 0.01%. DAX has fallen -0.22%. CAC has increased 0.05%. The German 10-year yield is down -0.004 at -0.407. Earlier in Asia, the Nikkei fell -1.41%. Hong Kong HSI rose 0.56%. China Shanghai SSE rose 1.60%. Singapore Strait Times rose 0.79%. Japan’s 10-year JGB yield increased 0.015 to 0.059.
US PCE price index rose to 1.0%, core PCE accelerated to 1.3%
US personal income rose 0.4% or USD 70.5B in July, much better than expected of -0.2% decline. Consumption rose 1.9% or USD 267.6B, also above the expectation of 1.5% mother. The headline PCE price index rose to 1.0% yy, up from 0.8% yy, but expected expectations of 1.2% yy. On the other hand, the Core PCE price index accelerated to 1.3% yy, up from 1.1% yy, which expected 1.3% yy.
Also released, the deficit on goods with 11.7% mother rose to USD 79.3 B
Canada’s GDP grew by 6.5% in June, the highest record since 1961
Canada’s GDP grew 6.5% mother in June, above expectations of 5.2% mother. This is the largest monthly increase since the series started in 1961. Economic activity still remained around -9% below February’s pre-pandemic level. Both goods-producing (+ 7.5%) and service-producing (+ 6.1%) industries increased by 19 out of 20 industrial sectors in June.
Economic sentiment in the euro area rose to 87.7, recovering 60% of losses in March and April
The euro area economic sentiment indicator rose to 87.7 in August, up from 82.4, above expectations to 84.9. EU ESI rose 5 points to 86.9. The ESIs in both regions have so far recovered approx. 60% of the total losses in March and April.
For the euro area, industrial confidence rose from -16.2 to -12.7. The confidence of the services increased from -126.2 to -17.2. Consumer confidence rose slightly from -15.0 to -14.7. Retail confidence rose from -15.1 to -10.5. However, construction confidence fell from -11.4 to -11.8. Employment expectations also rose from 86.7 to 89.6.
France’s GDP -13.8% in Q2, lowest point reached in April
According to initial estimates, French GDP fell -13.8% qoq in Q2. It is -19% lower than GDP back in Q2 2019. INSEE said, “the gradual lifting of the restrictions led to a gradual recovery of economic activity in May and June, after the lowest point reached in April.”
Looking at some details, household consumption expenditure fell (-11.0% after –5.8%), as did total gross investment in a more significant way (GFCF: -17.8% after –10.3%). Public expenditure also declined (–8.0% after –3.5%). Overall, final domestic demand excluding inventory changes fell sharply: it contributed –12.0 basis points to GDP growth.
Exports fell this quarter (–25.5% after –6.1%) more strongly than imports (–17.3% after –5.5%). Overall, the foreign trade balance contributed negatively to GDP growth: –2.3 points after –0.1 points in the previous quarter. Conversely, changes in inventories contributed positively to GDP growth (+0.6 points).
Also from France, the CPI fell to 0.2% yy in August, down from 0.9% yy, well below expectations of 0.2% yy. consumer spending rose only 0.5% mom in July, worse than expected by 3.2% mom.
The German Gfk consumer climate fell to -1.8, coronavirus creates uncertainty again
The German Gfk consumer climate for September fell -1.8, dropped from -0.2, missing the expectation of 2.0. Financial expectations improved to 11.7, up from 10.6. However, revenue expectations fell sharply to 12.8, down from 18.6.
Rolf Bürkl, consumer expert at GfK, “an increase in the number of infections and fear that coronavirus-related restrictions will be further tightened creates uncertainty and consequently dampens the mood… Whether this is only a temporary slowdown depends primarily on what infection rates look like in the future and the necessary measures to be taken by decision-makers. ”
Swiss KOF rose to 110.2, recovery phase or V-shaped recession
Swiss KOF Economic Barometer rose to 110.2 in August, up from 86.0, well above expectations to 90.0. It is the third straight month of increase and it is now well above the long term average. KOF also said, “the Swiss economy is in the recovery phase of what currently appears to be a V-shaped recession.”
The indicator groups for manufacturing, the hospitality sector and foreign demand are primarily responsible for the current increase. To a lesser extent, the indicators relating to financial and insurance services as well as other services contributed to the improvement. On the other hand, the construction sector recorded a slight deterioration.
USD / JPY Midway Outlook
Daily pivots: (S1) 105.89; (P) 106.29; (R1) 106.98; More …
The USD / JPY is still in the 105.10 / 107.05 range and intraday bias remains neutral at first. On the upside, the break of 107.05 will revive the case of reversal in the short term and bring stronger rally. On the downside, break of 105.10 will target a test on 104.18. Break that will resume the entire decline from 111.71.
In the bigger picture, the USD / JPY remains in a long-term falling channel, starting back in 118.65 (Dec. 2016). Therefore, there is as yet no clear indication of trend reversal. The downtrend may still extend through 101.18 lows. However, a sustained break of 112.22 should confirm the completion of the downtrend and turn the outlook to bullish for 118.65 and above.
Update of economic indicators
|23:30||JPY||Tokyo CPI Core Å / Y Aug||-0.30%||0.30%||0.40%|
|06:00||EUR||Germany Gfk consumer confidence sep||-1.8||2||-0.3||-0.2|
|06.45||EUR||France CPI M / M Aug P||-0.10%||0.40%|
|06.45||EUR||France CPI Å / Å Aug P||0.20%||0.70%||0.90%|
|06.45||EUR||France Consumer spending M / M Jul||0.50%||3.20%||9.00%||10.30%|
|06.45||EUR||France’s GDP Q / Q Q2||-13.80%||-13.80%||-13.80%|
|07:00||CHF||KOF Economic Barometer Aug||110.2||90||85.7||86|
|09:00||EUR||Indicator of economic sentiment in the euro area aug||87.7||84.9||82.3||82.4|
|09:00||EUR||Eurozone Services Sentiment aug||-17.2||-26.1||-26.2|
|09:00||EUR||Consumer confidence in the euro area aug||-14.7||-15||-14.7||-15|
|09:00||EUR||Eurozone industrial confidence August||-12.7||-13||-16.2|
|09:00||EUR||Business climate aug||-1.33||-1.8|
|00:30||CAD||GDP M / M June||6.50%||5.20%||4.50%||4.80%|
|00:30||USD||Personal income M / M Christmas||0.40%||-0.20%||-1.10%||-1.00%|
|00:30||USD||Personal use Christmas||1.90%||1.50%||5.60%||6.20%|
|00:30||USD||PCE Price Index M / M Jul||0.30%||0.10%||0.40%||0.50%|
|00:30||USD||PCE Price Index Å / Y Jul||1.00%||1.20%||0.80%|
|00:30||USD||PCE Core Price Index M / M Jul||0.30%||0.40%||0.20%||0.30%|
|00:30||USD||PCE Core price index Å / Y Jul||1.30%||1.20%||0.90%||1.10%|
|00:30||USD||Wholesale warehouse Jul P||-0.10%||-1.00%||-1.40%|
|00:30||USD||Commodity Balance (USD) Jul||-79.3B||-70.6B||-71.0B|
|13:45||USD||Chicago PMI aug||51||51.9|
|14:00||USD||Michigan Consumer Sentiment Index aug||72.8||72.8|