The US$ is mixed while stocks are a little lower after some soft US data after the US Personal Consumption/Expenditure data came in below expectations. The real action was in Sterling which remains under heavy pressure because of the “no-deal” Brexit concerns, while the Aud$ and Kiwi are also under pressure as traders turn into risk averse mode ahead of the FOMC Meeting, due later today. The US/China trade talks resumed on Tuesday in Shanghai, but with no breakthrough seen likely, which will do little to help the Aud$ in particular, in the days ahead if there is no progress.
In terms of the data, the June, personal income rose 0.4%, above expectation of 0.3%, while personal spending rose 0.3%, matching expectations. The headline PCE was unchanged at 1.4% yy and missed expectation of 1.5% yy while the core PCE inflation accelerated to 1.6% yy, up from 1.5% yy, but missed expectation of 1.7% yy.
In the other markets WTI jumped by 2.2% on talk of a sharp drop in Iranian oil exports due to the ongoing sanctions and because of the likelihood of a Fed rate cut later today, pushing the price to a 3 week high. Gold and Silver were both slightly higher as well on the hopes of a rate cut.
Wednesday is going to be busy, although the main focus of the session will not come until later, when the FOMC announce their decision, which I expect to be a 25bp cut in rates along with a “steady-as-she-goes” outlook. There is plenty before that though, beginning with the China NBS Mfg/Non Mfg PMIs (exp 49.6/54.5) along with the NZ Activity Outlook/Business Confidence (exp 8.3%/-35), Australian Private Sector Credit (exp 0.3%mm) and CPI,(exp 0.5%qq, 1.6%yy; Trimmed Mean exp 0.4%qq, 1.5%yy). Later on we will get the German Retail Sales (exp 0.5%mm, 2.75yy) and EU Q2 GDP (exp 0.2%mm, 1.0%yy), and then the US ADP Jobs data (exp 150K), which will give a pointer as to what to expect from the Jobs/NFP/Average Hourly Earnings data on Friday. All the real action will come after the Fed announcement though, so while there is a lot of data ahead, I would expect the market to be generally choppy until then.
Economic data highlights will include:
Wed: China NBS Mfg/Non Mfg PMIs, NZ Activity Outlook, Business Confidence, Australian Private Sector Credit, CPI, Japan Housing Starts, Consumer Confidence, Construction Orders, German Retail Sales, EU Q2 GDP, US ADP Jobs data, FOMC Meeting/Interest Rate Decision/Press Conference, Chicago Purchasing Managers Index, EIA Crude Oil Stocks Weekly Change
Market moves, in brief:
FX: DXY 98.07 (+0.01%)
Bonds: US10Y; 2.061% (-0.28%), German 10Y; -0.398% (-1.27%), UK 10Y; 0.636% (-2.08%), Australian 10Y; 1.2216% (-0.49%), NZ 10Y; 1.480% (-0.67 %), China 10Y; 3.182% (+0.09%)
Stock Indices: DJI; -0.09%, S+P; -0.26%, NASDAQ; -0.24%, EUStoxx50; -1.72%, FTSE100; +2.98%, Shanghai Composite; +0.39%,
Metals: Gold $1431 oz (+0.27%), Silver $16.58 oz (+0.65%), Copper $2.6785 lb (-1.45%), Iron Ore $117.14 per tonne (NYMEX) (+2.25%),
Oil: WTI $58.31 pb (+2.2%)
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