Forex Afternoon Wrap – 16/09

UK Unemployment rate dips to 5.5%. US inflation subdued

Today’s Economic Data:

• New Zealand Current Account -1.22bn vs. -1.4 bn
• Australia MI leading index m/m -0.3% vs. 0.1% previously
• UK average earnings index 2.9% vs. 2.5%; Claimant count change 1.2k vs. -5.1k
• UK Unemployment rate 5.5% vs. 5.6%
• Switzerland ZEW economic expectations 9.7 vs. 5.9 previously
• Eurozone final CPI y/y 0.1% vs. 0.2%; final core CPI y/y 0.9% vs. 1.0%
• Canada manufacturing sales 1.7% vs. 1.1%
• Canada foreign securities purchases -10.12bn vs. 5.5bn
• US CPI m/m -0.1% vs. -0.1%; core CPI m/m 0.1% vs. 0.1%

Later:

• UK Inflation report hearings
• US NAHB housing market index
• Crude Oil inventories
• TIC long term purchases

The currency markets opened today with the Yen easing back giving away its gains from yesterday. The Asian trading session saw the equity markets close in the positive across the board with the Nikkei 225 closing with modest gains of 0.81% and the Shanghai and the Hang Seng index both up 4.91% and 2.38% respectively. There were no major releases during the Asian trading session. The BoJ’s monthly report was released which kept up the usual narrative about the optimism that the inflation target could be reached. However, there was a bit of bad news for Japan as Standard&Poors lowered the sovereign credit rating to A+ from AA-. However, the ratings agency maintained that the outlook was stable noting that the Japanese economy remains a high income economy despite the slowdown in growth and deflation.

The Aussie dollar was seen trading stronger into the US session after the currency fell to the lows of 0.708. The currency broke yesterday’s highs of 0.7153 ahead of the US CPI data. The Kiwi was weaker for the day, down -0.19% ahead of the GDP data due to be released later tonight.

The European session saw the UK jobs report posting strong numbers. The average earnings beat estimates rising 2.9%, while the unemployment rate fell 5.5%. The British Pound staged a strong rally across the board with GBPUSD up 0.62% for the day at the time of writing. EURGBP was particularly hit as the single currency fell by over -1% off the daily highs of 0.735 to trade near the lows of 0.7268.

Data from the Eurozone saw the flash CPI falling below estimates, with the headline CPI estimated to have rising 0.1% while the final core CPI was modest at 0.9%. The Single currency came under pressure across the board with the bearish momentum picking up speed since yesterday’s decline. The Euro was seen trending weaker across the board while the EURUSD was down -0.4% ahead of the US trading session.

The US data saw the all important CPI data being released. On a monthly basis, headline CPI was down -0.1%, while on the core, CPI was up 0.1%, both matching estimates. On an annualized basis, Core CPI eased to 1.8% against estimates of 1.9%. The US Dollar saw a knee jerk sell off on the release with most of the currencies attempting to rally. Canada’s manufacturing sales grew 1.7%, beating estimates of 1.1%.

Later in the evening, the UK inflation report hearing is due followed by the US crude oil inventories report.