Good morning
Risk sentiment continues to wane, with Evergrande concerns still driving uncertainty, a default is looking more likely as reports suggest the Chinese government will not step in to help the stricken property firm. A year or so ago Evergrande stocks were trading near US$30, now they sit just above $2.00. Higher gas prices also causing disruption, with some suggestions Europe could face shortages this winter as stocks are low and supply remains tight. We have one eye on the Fed tomorrow evening. Add in a bit of ongoing Covid issues and we see several reasons to feel a little uncomfortable,
It will be quite difficult for the Fed to come across very dovish. They are expected to talk about, but not officially announce, tapering tomorrow, this seems pretty much priced in. Only if they say that tapering is well off the agenda will the message really be dovish but this is highly unlikely, instead I think the ‘dot plot’, which signals interest rate expectations, will perhaps be the key focus tomorrow.
GBPUSD did trade down to 1.3640 although has crept back to the 1.3680 area this morning, GBP also a touch weaker against EUR at 0.8580 (GBPEUR 1.1655)
EURUSD is now 1.1730 having tested 1.1700 yesterday, a lot of focus on the upcoming German elections this weekend. ECBs Villeroy has made it clear ECB needs to keep policy highly accommodative.
On the subject of elections, Canada PM Trudeau manages to cling onto power but fails to get the majority he was hoping for when he called the snap election. USDCAD down to 1.2755 from almost 1.2900 yesterday.
RBA sounded a little upbeat but still mention concerns that the Delta variant outbreaks and subsequent lockdowns will slow the recovery. AUDUSD very slightly higher at 0.7270, while AUDNZD breaks back above 1.03 to reach 1.0350 as RBNZs Hawkesby says a 50bps rate rise in October is unlikely, preferring a more considered approach with increments of 25bps.
One of the key pieces of news is that the US are to relax travel restrictions from November for vaccinated UK and EU citizens and it is being reported that airlines are seeing booking numbers surge. There is a little doubt as to whether people with the AstraZeneca vaccine will be accepted into the US under the new rules, given it is not approved for use in the US. US Fauci reckons it will not prove to be an issue.
I am out of the office for a few days now so there will be no report to hit your inbox for a while. Yes, great timing I know with the various rate meetings going on. We do remain well and truly open mind you and I’m sure I’ll be pretty glued to my phone and emails so if you need anything do continue to ask. I’m back later in the week but have added in the calendars to Friday just in case.
- 13.30 US housing starts, building permits
- 13.30 CAD new house prices
- 01.30 AUS Westpac leading index
- 02.30 PBoC rate announcement
- 03.00 RBAs Bullock speaks
- 04.00 BoJ rate announcement
- 07.00 BoJ press conference
Wednesday
- 14.00 SANB quarterly bulletin
- 15.00 US existing home sales
- 15.00 EU consumer confidence
- 19.00 FOMC rate announcement
- 19.30 FOMC press conference
- 00.00 AUD commonwealth bank PMIs
Thursday
- 08.30 SNB rate announcement
- 09.00 EU markit manufacturing, services PMIs
- 09.30 markit manufacturing, services PMIs
- 12.00 BoE rate announcement
- 13.30 US initial jobless claims
- 13.30 CAD retail sales
- 14.45 US markit manufacturing, services PMIs
- 23.45 NZ trade balance
- 00.01 UK GfK consumer confidence
- 00.30 Japan CPI
Friday
- 09.00 German IFO
- 15.00 US new home sales
- 20.30 US CFTC position data
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