The US$ remains firm at the start of Tuesday trade (DXY: 99.40, +0.27%) while the Euro is under ongoing pressure after weaker than expected German inflation data, which slowed to 1.2% yy in September, down from 1.4% yy and missed expectation of 1.4% yy. In other EU data on Monday, German retail sales rose by 0.5% mm in August, below expectation of 0.6% mm while the Eurozone unemployment rate dropped to 7.4%, down from 7.5% and beat expectation of 7.5%.
Stocks were slightly firmer in a quiet end of quarter session, while the real action was in the commodity markets, where oil fell by 3% after a Saudi assurance that crude output is back to full production after the recent bomb attack, and Gold and Silver broke through important technical support and headed sharply lower, with the potential for more to come on the downside.
Tuesday will be another busy session, with the initial focus being on the RBA, where a rate cut of 25bp is now 80% priced into the market, to try to light a fire under a faltering Australian economy. The risk is that they sit on their hands, which would cause a nasty spike higher in the Aud$ given the current overweight short positioning, although I think a cut is most likely and remain short heading into it. Aside from the RBA, Australia will have the August Private Sector Credit (exp 0.2%mm, 2.9%yy), while Asia will also get to see the China Mfg/Non-Mfg PIMs (exp 49.8/53.7) as well as the Caixin China Mfg PMI (exp 51.4). Europe too will be busy with the UK Q2 GDP (exp 0.5%qq, 1.2%yy), the EU Unemployment rate (exp 7.5%) and the German CPI (CPI, exp 1.9%mm, 1.4%yy; HICP exp 1.2%yy). The US will have a bit of Fed activity but otherwise it will be quiet; the Chicago Purchasing Managers Index (exp 5.05%) and the Dallas Fed Mfg Business Climate (exp -2.3) are both due. Have a good day.
Economic data highlights will include:
Tue: China National Holiday, NZIER Business Confidence, Australian CBA/AIG Performance of Mfg Index, Japan Tankan, Unemployment, Consumer Confidence, Japan Jibun Mfg PMI, RBA Interest Rate Decision/Statement, Commodity Index, EU/UK/US Mfg PMIs, EU CPI, ISM Mfg PMI/Prices Paid, Construction Spending, Total Vehicle Sales, API weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 99.40 (+0.27%)
Bonds: US10Y; 1.670% (-0.87%), German 10Y; -0.572% (+0.85%), UK 10Y; +0.405% (-3.80%), Australian 10Y; 1.028% (+7.5%), NZ 10Y; 1.098% (-1.08 %), China 10Y; 3.135% (+0.07%)
Stock Indices: DJI; +0.36%, S+P; +0.50%, NASDAQ; +0.75%, EUStoxx50; +0.66%, FTSE100; -0.25%, Shanghai Composite; -0.92%,
Metals: Gold $1472 oz (-1.65%), Silver $17.01 oz (-2.99%), Copper $2.5745 lb (-0.87%), Iron Ore $92.25 per tonne (NYMEX) (+2.81%),
Oil: WTI $54.28 pb (-3.19%)
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