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US housing starts to rebound in August – Nomura

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Analysts at Nomura expect the US housing starts to rebound in August to an annualized pace of 1210k, up 3.6% from July.

Key Quotes

“Both single- and multifamily housing starts were weaker than expected in July with pronounced softness in the West Census region, possibly related to disruptions from wildfires.”

“We expect a rebound in August, likely driven by volatile multifamily housing starts, based on incoming housing permits data. However, we remain conservative on residential investment as a whole.”

“For building permits, we expect a modest 0.2% m-o-m increase to an annualized pace of 1305k.”

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UK Treasury minister Mel Stride: There could be another referendum if Chequers plan is rejected

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The UK Treasury Minister, Mel Stride, speaking to Sky News this Wednesday, was noted saying that there could be another referendum if the Prime Minister's Chequers proposals are rejected in a vote by the Commons.

Meanwhile, the GBP/USD pair has managed to recover a part of its early slump triggered by news that the UK PM will reject the improved offer by Michel Barnier for a solution on the Irish border.
 

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AUD acting like a tariff risk barometer – AmpGFX

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Greg Gibbs, Analyst at Amplifying Global FX Capital, suggests that the AUD has tended to act more as a risk barometer for China and tariffs in recent months. 

Key Quotes

“Falling significantly, even as its domestic economy strengthened to be growing more consistently above-trend in the last year, further reducing spare capacity in the labour market and bringing the RBA closer to a date when it might consider raising interest rates.”

“If you cover one eye, the Australian economy is on a road to normalization, and the AUD might seem cheap.  Part of that apparent strength is the stability in Australian export prices.  Chinese steel production has remained relatively sold despite a gradual slowing in the Chinese economy.  The most recent Chinese residential property market activity has gained momentum, supporting the outlook for steel demand.”

“Chinese infrastructure activity has been falling surprisingly fast this year, but observers, including the RBA, expect China to ramp-up infrastructure investment to help support the economy.”

“Growth risks from tariffs may encourage policymakers in China to use fiscal and monetary policy to boost domestic demand, supporting import demand from Australia.  It is possible to construct a favourable scenario for the AUD notwithstanding the larger more sustained threat to China’s economy and financial markets arising from US trade policy.”

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Switzerland’s SECO: 2018 Swiss economic growth seen at 2.9%

Switzerland’s State Secretariat for Economic Affairs (SECO) published its quarterly economic forecasts on Wednesday, with the key highlights found below.

2018 economic growth seen at 2.9%; prior forecast 2.4%.

2019 economic growth 2.0%; prior forecast 2.0%.

2018 inflation seen at 1.0%; prior forecast 1.0%.

2019 inflation seen at 0.8%; prior forecast 0.8%.

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Forex Today: Aussie jumps on China Li’s Yuan comments, UK CPI – Key

The risk-on sentiment was the underlying theme in Asia this Wednesday, as the dust settles over the US-China trade war fears. The Asian equity markets return to the green zone while Treasury yields clung to the overnight gains. The US dollar, however, failed to benefit from higher Treasury yields and offered support to most majors.

The Aussie was the biggest gainer and tested the 0.7250 level, as the sentiment was lifted after the Chinese Premier Li said that China won’t devalue the Yuan to stimulate the exports. The Kiwi followed suit and regained the 0.66 handle. The USD/JPY pair was little changed on the BoJ’s status-quo and consolidated around 112.35. The Loonie was better bid amid hopes of the NAFTA deal and positive oil prices. Meanwhile, the GBP reversed the early spike to 1.3175 on Brexit headlines and consolidated near 1.3150 levels heading into the UK CPI release.

Main topics in Asia

Brexit headlines coming through, pound piercing recent highs

NZ: Q2 current account deficit widens to 3.3% of GDP – Westpac

UK Prime Minister Theresa May: The EU must show goodwill for a Brexit deal

China will use trade war with US to replace imports – state media

China Premier Li: China won't devalue currency to stimulate exports

BoJ leaves monetary policy unchanged

BoJ leaves unchanged forward guidance on rates and economic assessment

BoJ’s Kataoka dissents from view that inflation will accelerate toward 2%

Key Focus ahead

Today’s EUR calendar remains relatively busy, with the UK CPI report for the month of August to headline. The Eurozone current account and construction output data will be also published. The UK headline CPI is expected to come in a tad softer at 2.4% y/y vs. 2.5% previous while core figures are also seen lower at 1.8% y/y vs. 1.9% last. Meanwhile, the BOE Chief Economist Andy Haldane’s speech due at 0800 GMT will also remain in focus.

In the NA session, the US housing data will be reported alongside the current account data at 1230 GMT, followed by the EIA crude stocks data at 1430 GMT. Besides, the ECB President Draghi’s speech will also grab a lot of eyeballs ahead of New Zealand’s Q2 GDP release at 2245 GMT.

EUR/USD: Inverse head-and-shoulders breakout may remain elusive on rising US-DE yield spread

The daily chart of the EUR/USD is flashing a bullish reversal pattern, but a breakout may remain elusive, as the bond yield differentials are rising in the EUR-negative manner.

GBP/USD sticking to recent highs ahead of UK CPI reading

Pound traders experience some much-needed relief on Brexit headlines after months of stonewalling and unmoving negotiations. Wednesday also features some potentially hard-hitting data, with the UK's inflation reading hitting at 08:30 GMT. 

UK CPI Preview: With inflation decelerating in favor of real wages, Sterling will be supported

The UK headline inflation is expected to have decelerated to 2.4% y/y in August while core inflation slow to 1.8% y/y. The UK Inflation outpaces the nominal UK wage growth by 0.2% y/y when bonuses are included and by 0.4% y/y excluding bonuses.

How to trade the UK inflation with GBP/USD

UK inflation is closely watched by the BOE and moves the British Pound. The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.

New Zealand Q2 GDP seen lower at 0.5% – Westpac

Analysts at Westpac offer their view on New Zealand’s Q2 GDP release due on the cards at 2245 GMT later on Wednesday.

 

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