FX markets are very quiet today, with major pairs and crosses stuck in yesterday’s range so far. The dollar is trying to rally but lacks sustained buying. Traders are clearly holding bets ahead of tomorrow’s nonfarm payrolls report. As for the week, the greenback remains the worst performer, followed by the yen and the Swiss franc. Commodity currencies are the strongest, but they are just in corrective recovery. The euro and the pound sterling are mixed.
Technically, if the dollar is to resume its prior uptrend, it is more likely to break against the commodity currencies first, with help from the return of risk aversion sentiment. Thus, some will focus on the temporary low of 0.6362 in AUD/USD and the temporary high of 1.3832 in USD/CAD. The breakout of these levels could be the prelude to a broader comeback of the greenback.
In Europe, at the time of writing, the FTSE is down -0.95%. The DAX is down -0.18%. The CAC is down -0.59%. Germany’s 10-year yield is up 0.0143 at 2.042. Earlier in Asia, the Nikkei rose 0.70%. Hong Kong’s HSI index fell -0.42%. The Singapore Strait fell -0.05%. Japan’s 10-year JGB yield fell from -0.0059 to 0.244.
US initial jobless claims rose to 219,000, above expectations
U.S. initial jobless claims rose 29,000 to 219,000 in the week ending Oct. 1, above expectations of 205,000. The four-week rolling average for initial claims rose 250 at 206.5k.
Continuing claims increased by 15,000 to 1,361,000 in the week ending September 24. The four-week rolling average for continuing claims fell from 10,000 to 1,371,000.
ECB accounts: some members preferred an increase of 50 basis points in September
Minutes of the ECB’s monetary policy meeting on September 7-8 showed that a “very large number” of committee members expressed a preference for a 75 basis point hike, which was “a response commensurate” to the upward revisions to the inflation outlook and an important signal of determination to bring inflation back to its target “in due time.
But “some members” preferred a 50 basis point hike as it would be “significant enough to signal determination to pursue interest rate normalization”. With the “imminent risk of recession”, a 50 basis point hike on a “sustained path to more neutral rate levels” could prove “sufficient” to bring inflation back on target. “What needed to be addressed was the risk of a sharp rise in inflation, exacerbated by the war, destabilizing inflation expectations,” the minutes note.
But add the ending, all members joined a consensus for the 75 basis point hike, while maintaining that the policy should “not follow a predefined path” and be set “meeting by meeting.”
Eurozone retail sales volume fell -0.3% m/m in August, EU down -0.2% m/m
Eurozone retail sales volume fell -0.3% m/m in August, in line with expectations. Retail trade volume decreased by -0.8% for food, beverages and tobacco, while it increased by 0.2% for non-food products and 3.2% for fuels automobiles.
EU retail sales volume fell -0.2% month-on-month. Among the Member States for which data are available, the largest monthly falls in total retail trade volume were recorded in the Netherlands (-2.2%), Germany (-1.3%) and Malta (-1.1%). The highest increases were observed in Slovenia (+7.0%), Luxembourg (+3.8%) and Ireland (+3.5%).
UK construction PMI rose to 52.3, but optimism fell
The UK construction PMI rose from 49.2 to 52.3 in September, above expectations of 48.1. S&P Global said total industry activity rose for the first time in three months. The production growth was tied to work on delayed projects. Business optimism was at its lowest since July 2020 as new orders stalled.
Tim Moore, Chief Economics Officer at S&P Global Market Intelligence, said: “Forward-looking survey indicators deteriorated further in September, with new business volumes stalled and production growth expectations for the year now coming in at the lowest since July 2020. This reflects growing concerns in the construction sector that rising interest rates, the energy crisis and the risks of recession in the UK are all set to dampen the customer demand in the coming months.
NZ Robertson not concerned about NZD outlook as NZD/USD extends rally
New Zealand Deputy Prime Minister Grant Robertson today said it would be a ‘difficult year’ with a ‘global downturn’. New Zealand would see “less demand and some slowdown”. But, “that does not mean, for me, a recession. There is a balance to be found here.
“Monetary and fiscal policies must be coordinated, work together,” he said. “When interest rates rise, they will limit demand.” He also said he was “not concerned about the long-term outlook for the New Zealand dollar.”
USD/CHF mid-day outlook
Daily Pivots: (S1) 0.9784; (P) 0.9836; (R1) 0.9888; After…
USD/CHF still extends the consolidation pattern from 0.9964 and the intraday bias remains neutral. Outlook is unchanged, further rally is in favor as long as 0.9694 support holds. On the upside above 0.9964 rally will resume from 0.9369 to retest 1.0063 high. On the downside, however, the break of 0.9694 support will extend the corrective setup at 1.0063 with another leg down, towards 0.9478 support first.
Overall, the current pattern suggests that the uptrend from 0.8756 (2021 low) is still ongoing. Sustained break of 1.0063 will target 100% projection 0.9149 to 1.0063 0.9369 to 1.0283 then 1.0342 (2016 high). For now, this will remain the preferred case as long as the support at 0.9369 holds, even if there is a deep pullback.
Economic Indicators Update
| GMT | Ccy | Events | Real | Provide | Previous | amended |
|---|---|---|---|---|---|---|
| 9:30 p.m. | USD | AiG construction performance index seven. | 46.5 | 47.9 | ||
| 00:30 | USD | Trade Balance (AUD) August | 8.32B | 10.00B | 8.73B | 8.97B |
| 06:00 | USD | Factory orders in Germany M/M August | -2.40% | -0.50% | -1.10% | 1.90% |
| 08:30 | GBP | Construction PMI Sept. | 52.3 | 48.1 | 49.2 | |
| 09:00 | USD | Retail sales in the euro zone M/M August | -0.30% | -0.30% | 0.30% | -0.40% |
| 11:30 a.m. | USD | ECB monetary policy meeting accounts | ||||
| 11:30 a.m. | USD | Challenger job cuts Y/Y Sep | 67.60% | 30.30% | ||
| 12:30 | USD | Initial jobless claims (September 30) | 219K | 205K | 193K | 190K |
| 14:00 | BODY | Ivey PMI Sept. | 62.3 | 60.9 | ||
| 2:30 p.m. | USD | Natural gas storage | 125B | 103B |
