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FX Daily, September 30: SNB Intervenes to Polish Q3 Results

 

Swiss Franc

During the day the EUR/CHF has fallen to a low of 1.0819. We know that the in-official new floor lies at that level. Moreover, the SNB had to polish the Q3 results. With interventions she lifted the EUR/CHF to 1.0893 and the euro continued rising thanks to speculators that jumped on the train.
There was no economic data that could have justified the sudden increase.

EUR/CHF, September 30

EUR-CHF - Euro Swiss Franc, September 30, 2016

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FX Rates

True to its recent habit, the US dollar is finishing the week on a firm note.  On the month, though, the greenback has fallen against most of the majors, but sterling, the Canadian dollar, and the Swedish krona.

FX Performance, September 30 2016 Movers and Shakers

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Global equities are trading heavily, and investors’ angst is lending support to bond markets. The concerns about the contagion effect emanating from Germany’s largest bank is taking a toll on sentiment. Deutsche Bank stock fell to a new record low in the European morning but has turned higher in subsequent turnover. Nevertheless, the financial sector is Europe is off twice what the loss of the overall market. The Dow Jones Stoxx 600 is off 1%, while the financial sector is off more than 2%. Italian banks share index is off 2.5% and is near two-month lows.

 

FX Daily Rates, September 30 2016

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In addition to the Chinese data, there are two other events this weekend to note. The first is a formality. The Chinese yuan will be included in the IMF’s SDR starting October 1. The second is more substantive. Hungary holds a referendum on the EU’s immigration policies. It is likely to reject plans to relocate refugees, setting the stage for an escalation of the simmering confrontation with the EU.

FX Performance, September 30 2016

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China

The MSCI Asia-Pacific Index fell 1%, to record its largest loss in three weeks. Japan’s Topix was off 1.5%, with financials off 2.2%. Chinese stock markets managed to buck the trend to post minor gains, but even in Shanghai, banks shares ended lower. Separately, China’s Caixin manufacturing PMI edged to 50.1 from 50.0. The average in Q3 was 50.2.  That is the highest quarterly average since Q3 2014, and provides another piece of data suggesting that Chinese economy has stabilized, albeit at lower levels and with higher debt. Chinese markets are closed the next week for national holidays, though official PMI data will be reported over the weekend.

China Caixin Manufacturing PMI

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China Caixin Manufacturing PMI, September 30 2016

Source Investing.com - Click to enlarge

Japan

Japan released a mixed bag of data. Prices pressures continue to ease.  Household spending fell more than twice what was expected. Industrial output was stronger than forecast, helped by a surge in auto output. Unemployment ticked up to 3.1% from 3.0%.

Headline CPI remained negative (-0.5% vs. -0.4% year-over-year) in August, for the fifth consecutive month. Excluding fresh food, which is the BOJ preferred measure, fell -0.5% from a year ago. The measure excluding food and energy slipped to 0.2% from 0.3%. Tokyo reports its inflation figures with less of a lag, but the September data dive little hope of a recovery in the national price measures.

Japan Construction Orders YoY

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Japan Construction Orders YoY, September 2016

Source Investing.com - Click to enlarge

The BOJ reported that its staff, excluding managers, will be given a 0.2% pay increase in the base wage. This follows a 0.6% increase in the FY15, and although it is the third year that the base wage has increased, the small amount illustrates the similar pressure facing the private sector. Weak wage increases are one of the factors holding back consumption. Overall household spending fell 4.6% in August from a year ago. The Bloomberg median was for a 2.1% decline. Household spending has been contracting on a year-over-year basis since February.

Japan Consumer Price Index

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Japan Consumer Price Index

Source Investing.com - Click to enlarge

Industrial output rose 1.5% in August, which is three-times what the median guesstimate projected. The year-over-year pace rose to 4.6% from -4.2% in July. Vehicle production rose 8.8% after a 4.1% slide in July. Construction orders jumped 13.8% after a 10.9% fall in July. Japan will report the Q3 Tankan survey early Monday in Tokyo. Sentiment among the large manufacturers is expected to post a small increase, and capex plans are expected to improve from the 6.2% of Q2.

Japan Unemployment Rate

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Japan Unemployment Rate, September 2016

Source Investing.com - Click to enlarge

Eurozone

Eurozone data was largely in line with expectations. The unemployment rate was steady at 10.1% in August, while the preliminary September CPI rose to 0.4% from 0.2%. This picks up the gains in energy, as the core rate was steady at 0.8%.

Eurozone Unemployment Rate

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Eurozone Unemployment Rate, September 30

Source Investing.com - Click to enlarge

The euro has been pushed to new lows for the week, just below $1.1170.  Last week’s low was seen near $1.1125. Barring new news, the intraday technicals suggest that the downside may have largely been exhausted in the  European morning.

Eurozone Core Consumer Price Index

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Eurozone Core Consumer Price Index (CPI) YoY, September 30 2016

Source Investing.com - Click to enlarge

The dollar has largely matched yesterday’s range against the yen. The greenback found sellers at JPY101.80 was approached, while buyers appeared after a big figure pullback.

Eurozone Consumer Price Index

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Eurozone Consumer Price Index (CPI) YoY, September 30 2016

Source Investing.com - Click to enlarge

United Kingdom

Better than expected UK data failed to lend much support to sterling.  Yesterday’s losses were extended, but the week’s low near $1.2920 remains intact. The intraday technicals warn that the low for the day, though, may not be in place.

Still, the UK could not have hoped for better data today. The Q2 GDP estimate rose to 0.7% from 0.6%, unexpectedly, but somehow, in the machinations of GDP calculations, this turned into a 2.1% year-over-year pace, down from 2.2%. Most promising for Q3 was news that the index of services for July rose 0.4%. This is the second best of the year thus far. The median forecast was for a 0.1% increase. The June series was also revised higher  (0.3% from 0.2%).

U.K. Gross Domestic Product QoQ

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U.K. Gross Domestic Product (GDP) QoQ, September 2016

Source Investing.com - Click to enlarge

The Q2 current account deficit was also smaller than anticipated, while investment was stronger than expected, rising 1.0% or twice the median forecast.

U.K. Gross Domestic Product (GDP) YoY

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U.K. Gross Domestic Product (GDP) YoY, September 2016

Source Investing.com - Click to enlarge

United States

There is a slew of North American data today. In the US, the personal consumption expenditures will be used to calculate Q3 GDP. After the improvement in the advance merchandise trade balance and inventory data, look for Q3 estimates to be raised again, with many, perhaps even the Atlanta Fed, returning toward 3% forecasts. The core PCE deflator, the Fed’s preferred inflation measure is expected to tick up to 1.7%, which would represent new two-year highs.

U.S. Core PCE Price Index

(see more posts on U.S. Core PCE Price Index (PCE Deflator), )
U.S. Core PCE Price Index YoY, September 2016

Source Investing.com - Click to enlarge

 

 

via Zerohedge:

After personal spending growth slowed modestly one month ago, rising 3.8% Y/Y, in August US consumption once again disappointed, staying flat in the month, below the 0.1% expected sequential rebound, although this was offset by an upward revision to the last month’s data from 0.3% to 0.4%. On an inflation adjusted basis, as feeds into the GDP beancount, Real PCE dipped -0.1% in August, well below July’s 0.3% bounce, missing the expectation of a 0.1% rise while the Core PCE Index was inline with the 1.7% expected on a Y/Y basis.

At the same time, Personal Income was in line with expectations, rising 0.2% sequentially, half the July growth rate of 0.4%, or a nominal increase of $39 billion, down from $66 billion last month, of which wages comprised just $13.3 billion while personal current transfers, aka government benefits mostly in the form of Medicaid, contributed over $10 billion in income.

Canada GDP

 And since incomes rose more than spending, the personal saving rose to $808 billion from $782 billion a month ago, resulting in another monthly pickup in the savings rate, which rose from a revised 5.6% to 5.7% in July, the highest since May, suggesting the the dramatic spending spree observed in Q1 and part of Q2 has so far to make any notable comeback.

Japan Personal Savings Rate
The Chicago PMI may attract attention. It is expected to improve from the 51.5 reading in August. Lastly, the University of Michigan’s consumer confidence report and the inflation expectation will be reported.

U.S. Chicago PMI

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U.S. Chicago PMI, September 2016

Source Investing.com - Click to enlarge

For its part, Canada reports July GDP.  It is expected to have risen by 0.3% after a 0.6% rise in June. The monthly GDP readings in Q1 16 and Q2 16 have averaged zero. Industrial and raw material prices are expected to have fallen in August. T

The US dollar bottomed near CAD1.3050 yesterday and tested CAD1.32 in the European morning. However, the greenback’s momentum appears to have stalled. Similarly, the Australian dollar, which posted an outside down day yesterday, saw follow through selling today, but the enthusiasm waned below $0.7600 and near the 20-day moving average (~$0.7595). There is scope toward $0.7630-$0.7640.

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Graphs and additional information on Swiss Franc by the snbchf team.

 

Full story here
Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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