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A Light Day on the Calendar Leaves Geopolitics and Monetary Policy in Focus

Bob Mason

Earlier in the Day:

It a relatively busy Asian session on the economic calendar through this morning.

Economic data through the session included wholesale inflation numbers out of New Zealand and trade data out of Japan.

Outside of the numbers, geopolitics and sentiment towards the economic outlook continued to influence ahead of the European open.

It’s all eyes on China and what retaliatory measures they deliver…

For the Kiwi Dollar

Quarter-on-quarter, the producer input price index rose by 0.3% in the 2nd quarter, following a 0.9% fall in the 1st quarter. Economists had forecast a 0.6% decline.

According to NZStats,

  • The unexpected rise came off the back of an 8.7% jump in prices received for butter, cheese, and milk powder.
  • Meat and meat product manufacturers also saw higher prices for the goods, with prices received rising by 3.5%

The Kiwi Dollar moved from $0.64286 to $0.64293 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.01% to $0.6417.

For the Japanese Yen

Japan’s trade balance shifted from a ¥589.6bn surplus to ¥246.9bn deficit in July. Economists had forecast a ¥200bn deficit.

According to figures released by the  Ministry of Finance,

  • Exports fell by 1.6%, year-on-year, in July, while imports fell by just 1.2%. Economists had forecast a 2.2% fall in exports and a 2.7% fall in imports.
  • The value of exports to China tumbled by 9.3%, while exports to the U.S increased by 8.4%.
  • In spite of a weakening European economy, exports to Western Europe increased by 5.2%.

The Japanese Yen moved from ¥106.438 to ¥106.393 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.01% to ¥106.39 against the U.S Dollar.

Elsewhere

The Aussie Dollar was up by 0.01% to $0.6780.

In the Asian equity markets, the Nikkei and ASX200 found support early on. At the time of writing, the two were up by 0.69% and by 0.77% respectively.

Better than expected economic data last week and hopes of monetary policy easing by the FED, amongst others, provided support.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Eurozone inflation figures for July are due out later today.

Finalized figures for the core annual rate of inflation and the annual rate of inflation will have a muted impact barring material deviation from prelim.

We can expect the market focus to be on the month-on-month move in consumer prices, which is forecast to be EUR negative.

Outside of the stats, sentiment towards the U.S – China trade war and monetary policy will continue to influence.

Following last week’s dovish chatter, any escalation in the trade war would provide further support of a significant monetary policy move next month.

At the time of writing, the EUR was flat at $1.1090.

For the Pound

It’s a quiet day ahead on the data front. There are no material stats due out of the UK later this morning.

UK politics and Brexit will provide direction on the day. Any increased support for Labor Party Leader Corbyn to oust Boris Johnson will influence. There was also talk of the British Prime Minister planning to meet Macron and Merkel.

While the prospect of talks is positive, there is unlikely to be any immediate progress, which would limit any upside.

At the time of writing, the Pound was down by 0.06% to $1.2142.

Across the Pond

It’s also a quiet day for the Greenback on the economic calendar.  There are no stats due out of the U.S later today to provide the Dollar with direction.

A lack of stats will leave the Dollar exposed to the Trump twitter account and sentiment towards FED monetary policy.

At the time of writing, the Dollar Spot Index was up by 0.08% to 98.221.

For the Loonie

It’s a quiet ahead on the economic calendar. There are no material stats due out on the day.

Geopolitics and market sentiment towards the economy and monetary policy will provide direction on the day.

The Loonie was down by 0.02% at C$1.3271, against the U.S Dollar, at the time of writing.

This article was originally posted on FX Empire

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