Global Markets:

  • Asian stock markets: Nikkei and Shanghai Composite have gained 0.60 %, Hang Seng rallied 1.50 %, ASX is up 0.10 %
  • Commodities: Gold at $1267 (+0.20 %), Silver at $19.21 (+0.31 %), Crude Oil at $93.26 (+0.40 %)
  • Rates: US 10 year yield at 2.43

News & Data:

  • Australia GDP QoQ 0.5 %, Expected: 0.4 %, Previous: 1.1 %
  • Australia GDP YoY 3.1 %, Expected: 3.0 %, Previous: 3.5 %
  • China HSBC Services PMI 54.1, Previous: 50.0
  • RBA Governor Stevens: Has made his view clear on the relatively high AUD, will not repeat them
  • Stevens: Unemployment rate is concerning, although clouded by data distortions
  • Stevens: Data shows further upgrading of non-mining investment, likely to see more
  • Stevens: Signs are growth is continuing in current quarter
  • Stevens: Labour market has degree of spare capacity, will take some time before unemployment falls

FX Overview:

  • AUD – AUD/USD opened around 0.9275 in Asia. The pair rallied to 0.93 after better than expected GDP data on algo & short-term specs buying, but failed to sustain momentum. The speech from RBA Governor Stevens didn’t deviate from the central bank’s statement yesterday, hence not much of a reaction in markets. AUD/USD settled in a 0.9270-85 range for the rest of the session. While the AUD is bid in the crosses, it is struggling to rally against the USD and further losses are likely. 0.9230 is next tech support and then the important 0.92 level. Key intraday resistance at 0.9320 (offers reported near the level) and then 0.9350. Meanwhile, AUD/JPY is posting fresh highs and there isn’t much resistance now until 99.03.
  • CAD – The Canadian Dollar is under pressure amid broad USD strength and ahead of the BoC rate decision. The market is expecting the Bank of Canada statemen to be a neutral factor for the currency. The central bank may acknowledge that growth in Q2 was firmer than expected at the July MPR but is unlikely to begin preparing the markets for eventual policy tightening at this time even if rate cuts are clearly off the program now. Keep in mind that BoC Governor Poloz will not hold a press conference after today’s rate decision. USD/CAD has bids towards 1.09 while offers from corporates are resting between 1.0950 and 1.0960. Stops reported above 1.0950 and through 1.0975.
  • EUR – The Euro was well bid in the crosses yesterday and dealers saw EUR short covering vs the commodity currencies, as well as strong EUR/GBP demand. EUR/USD is likely to remain in a 1.31-1.3150 range ahead of the ECB, as traders are not keen to add to EUR shorts ahead of the ECB given the crowded positioning.
  • GBP – The Pound has been the worst performers amongst G10 currencies as worries about the upcoming Scottish referendum (September 18th) are increasing. GBP/USD vols spiked yesterday, which suggests that the market has started to price in the risk of a yes-vote outcome. Cable has dropped to fresh lows at 1.6443 in Asia and the major support levels now are 1.6341 (Dec ’12 high) and 1.6250 (Feb ’14 low).
  • JPY – USD/JPY remains well-bid and a test of the post-Abenomics high of 105.45 seems imminent. Bids reported at 104.80/85, stops resting through 104.70. Offers from 105.40 up to 105.50 in good size.

Upcoming Events:

  • 07:15 GMT – Spanish Services PMI (55.1)
  • 07:45 GMT – Italian Services PMI (52.0)
  • 07:50 GMT – French Services PMI (51.1)
  • 07:55 GMT – German Services PMI (56.4)
  • 08:00 GMT – Euro Zone Services PMI (53.5)
  • 08:30 GMT – UK Services PMI (58.5)
  • 09:00 GMT – Euro Zone Retail Sales (-0.4 % MoM, 0.9 % YoY)
  • 14:00 GMT – Bank of Canada Rate Decision (1.00 %)
  • 14:00 GMT – US Factory Orders (11.0 % MoM)
  • 18:00 GMT – US Beige Book