Early Update: Full Calendar but Little News

Looking at the diary, today is the most important day of the
week. The Bank of England and the Swiss National Bank meet. 
 The UK reports retail sales.  EMU reports CPI figures.  The US reports
retail sales, industrial output, and two
September Fed surveys.   Yet the
economic updates are unlikely change sentiment ahead of next week FOMC and BOJ

The euro has been confined to a $1.1200-$1.1285 range since
the end of last week. 
 It is in the middle of that
range as the European session gets underway.   The dollar peaked yesterday
near JPY103.35 and is a big figure lower.  It has been capped near JPY102.50 in Asia.  Support is seen near JPY101.80.  Sterling is flat,
though Asia initially took it through yesterday’s
high before peaking near $1.3280.  Technically, there appears to be
potential toward $1.3300-$1.3330.   The dollar-bloc is little changed,
with the US dollar trading near seven-week highs against the Canadian and
Australian dollars.    
Asia-Pacific was off about 0.3% in late dealings.
  The loss is minor, but its extends the losing streak to the sixth session,
which makes it the longest suck streak since May.  Asian bond yields were
mostly softer, though Australia bucked the trend as its 10-year bond yield was
slightly firmer. European bond yields are also beginning the day 1-2 bp firmer.
 US 10-year Treasury is straddling the 1.70% level.  
Australia reported
that it lost 3.9k jobs in August.
  The market expected a 15k increase.
 However, full-time jobs grew 11.5k.
  The unexpected decline in the unemployment rate from 5.7% to 5.6% was a
function of the unanticipated decline in the participation rate to 64.7 (from
64.9).  The participation rate
matches the lowest since November 2014.    The Australian dollar is
flat as it continues to consolidated the large (1.3%) loss on Tuesday.
 Since then it has been unable to resurface above the previous support near
The New Zealand
dollar is weakest of the majors so far today.
  It is off 0.2%.  Some reports
suggest there was disappointment that the economy only expanded 0.9% in Q2
instead of 1.1%.  The pace of growth
would be the envy of most countries and minor loss hardly requires a unique fundamental explanation.  
The BOE has
provided low rate loans to banks, cut interest rates, resumed asset purchases
(both Gilts and corporate bonds). 
 Most of the economic data in recent
weeks has been reported above expectations.  There is no compelling reason
to expect the BOE to take additional measures now.  It will likely keep
the door open to additional action when
or if needed.  Retail sales may pullback after the heady 1.4% gain in July.  If there is a risk with the retail
sales, we suspect it would be on the upside due to strong tourism, given sterling’s depreciation post-referendum.
After a quiet
few days in terms of US economic report,
a full slate of data will be released
most important is retail sales, which account for about 40% of US personal
consumption expenditures.  Softer auto sales and lower gasoline prices
will weigh on the headline, but the GDP components, which also exclude building
materials, is expected to show a 0.4% increase. It true, it would match this
year’s average, which is almost twice last year’s.  

The US also
reports producer prices (0.1% gain is expected
on the headline month-over-month and year-over-year), which is not a market
will industrial output and manufacturing production figures for August draw much
attention.  The risk is that after strong
gains in July a modest pullback was
experienced last month.  Two Fed surveys (Empire and Philadelphia)
cover the month of September.  These reports pose some headline risk, but
they are both reported at the same time
as retail sales (and Q2 current account balance) and may be lost in the shuffle.  

It appears
that the bond and equity markets have entered a new phase that is seeing yields
trend higher, and equity prices move lower.
  The pace of this adjustment may be more important than the economic
data per se in driving the foreign exchange market.   The dollar-bloc
currencies and the Scandis seem most vulnerable among the majors, while the
freely accessible emerging market currencies, which mostly have current account
deficits, are also under pressure. 


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