Talking Points:
- Euro, Japanese Yen Look to Risk Sentiment Trends for New Direction Cues
- British Pound at Risk if Comments from BOE’s Shafik Trim Rate Hike Bets
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Financial markets settled into digestion mode overnight as a quiet economic data docket left traders without an immediate catalyst to fuel continued volatility. The US Dollar corrected cautiously lower having broadly outperformed in the prior session. The move higher followed hawkish comments from Atlanta Fed President Dennis Lockhart, who stressed that the US central bank remains on track to begin raising interest rates this year.
The absence of high-profile event risk may put sentiment trends at the forefront in the hours ahead. S&P 500 futures are ticking lower, hinting at a risk-averse bias. Follow-through along this trajectory may prove supportive for the Euro and the Japanese Yen while weighing on the likes of the Australian, Canadian and New Zealand Dollars.A similar setup was undermined by Mr Lockhart’s comments yesterday and he is in fact due to speak again today, but the markets have probably priced in his posture already and seem unlikely to significantly react further.
Bank of England Deputy Governor Nemat Shafik is also due to speak, with traders monitoring the remarks for clues informing rate hike timing speculation. The markets’ priced-in outlook has markedly deteriorated over the past two months, with investors seemingly doubting the likelihood of tightening at least before the fourth quarter of 2016.
The British Pound may edge lower as expectations deteriorate further if Ms Shafik’s comments echo those of fellow MPC member Jon Cunliffe, who struck a dovish tone yesterday. Cunliffe said he doesn’t see signs of building price pressures and warned that the external environment has weakened, calling for “limited and gradual” rate hikes when tightening does commence.
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Asia Session
GMT | CCY | EVENT | ACT | EXP | PREV |
23:30 | AUD | ANZ Roy Morgan Weekly Consumer Conf | 114.5 | - | 105.3 |
01:30 | AUD | House Price Index (QoQ) (2Q) | 4.7% | 2.3% | 1.6% |
01:30 | AUD | House Price Index (YoY) (2Q) | 9.8% | 8.0% | 6.9% |
02:00 | CNY | Conference Board Leading Index (AUG) | 334.4 | - | 331.1 |
European Session
GMT | CCY | EVENT | EXP | PREV | IMPACT |
06:00 | CHF | Trade Balance (AUG) (CHF) | 2.75B | 3.74B | Medium |
06:00 | CHF | Exports Real (MoM) (AUG) | - | -1.7% | Medium |
06:00 | CHF | Imports Real (MoM) (AUG) | - | -2.5% | Medium |
08:30 | GBP | Public Finances (PSNCR) (AUG) | - | -3.0B | Low |
08:30 | GBP | Central Government NCR (AUG) | - | -0.2B | Low |
08:30 | GBP | Public Sector Net Borrowing (AUG) (£) | 8.8B | -2.1B | Low |
08:30 | GBP | PSNB ex Banking Groups (AUG) (£) | 9.2B | -1.3B | Low |
10:00 | GBP | CBI Trends Total Orders (SEP) | 0.0 | -1.0 | Low |
10:00 | GBP | CBI Trends Selling Prices (SEP) | -5.0 | -6.0 | Low |
14:00 | EUR | Eurozone Consumer Confidence (SEP A) | -7.0 | -6.9 | Medium |
Critical Levels
CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
EURUSD | 1.0936 | 1.1085 | 1.1137 | 1.1234 | 1.1286 | 1.1383 | 1.1532 |
GBPUSD | 1.5345 | 1.5432 | 1.5470 | 1.5519 | 1.5557 | 1.5606 | 1.5693 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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