FX Highlights

  • USD is trading mixed, JPY trades higher supported by a spike in risk aversion as China's economic data was weaker than expected, China reported a smaller than expected rise in industrial output and exports and new loans declined in July, a spike in risk aversion was cushioned by a decline in Korean interest rates, GBP supported by report of better than expected house price balance and retail sales gains, limited by report of wider than expected trade deficit, German CPI fell more than expected, commodity currencies mixed to lower with selling attributed to concern about slowing growth in China and oil prices give back early gains
  • Focus turns to today's release of Q2 productivity and unit labor costs along with wholesale sales and inventories, the FOMC begins a two-day policy meeting, the FOMC is expected to continue with quantitative ease and hold rate policy steady, the trade will be looking to see whether the Fed extends quantitative ease or signals the timeframe for possible exit from quantitative ease, the Treasury will auction a record $75 bln in bonds, the bond auction will be a good test of investor appetite for US securities
  • BOJ leaves monetary policy unchanged as expected and keeps economic assessment unchanged, BOJ Governor Shirakawa sees no risk of deflation, JPY higher
  • China's July industrial production rises 10.8%, retail sales rise 15.2%, CPI falls 1.8%
  • UK July RICS house price balance improves to -8.1, July BRIC retail sales rise 1.8%, UK trade gap widened 6.45 bln from 6.17 last month, GBP higher
  • German July CPI falls 0.5%, y/y, the CPI decline may generate fear of deflation risk, EUR higher
  • Australia's July NAB business conditions index rises three points to +1, confidence rises six points to +10, AUD lower
  • US home prices fell by 12.1% in second quarter, but the rate of decline slowed
  • US equity markets set to open marginally lower, European equities mixed, Nikkei closed 66 points higher

Upcoming Events

  • US- Tuesday, Q2 productivity will be released expected at 3.7% compared to 1.6% last quarter along with Q2 unit labor costs expected at -1.5% compared to 3% last quarter and June wholesale inventories and sales expected at -0.8% and 0.2% respectively, the FOMC begins a two day policy meeting
  • CAN- Tuesday, July housing starts will be released expected at 145k compared to 140.7k last month