Mid-Day Report

Dollar Selloff Accelerates ahead of Weekend on Concern North Korea


Dollar's selloff accelerates today as markets are concerned of any more geopolitical risks during the week end. It will be North Korea's Foundation Day on Saturday and Pyongyang might just launch another missile to celebrate. At the same time, another hurricane Irma will likely make landfall in Florida late Saturday of early Sunday. In the background, the surprised early resignation of Fed Vice Chair Stanley Fischer created even more uncertainty in Fed as Janet Yellen's future as Fed Chair is unknown. Euro, despite being lifted against Dollar after ECB, could follow as the second weakest for the week.

Meanwhile, Canadian Dollar is set to end as the biggest winner of the week, as boosted by BoC rate hike as solid job data. The Canadian job market grew 22.2k in August, above expectation of 15.0k. Unemployment rate dropped to 6.2%, below expectation of 6.3%. That matched recent low back in October 2008. Capacity utilization rose to 85.0% in Q2.

Sterling surges after solid production data

Sterling surges against dollar today as lifted by solid production data. Some strength is seen against Euro, but the pound struggles to breakout against Yen. Industrial production rose 0.2% mom, 0.4% yoy in July, versus expectation of 0.2% mom, 0.3% yoy. Manufacturing production rose 0.5% mom, 1.9% yoy versus expectation of 0.3% mom, 1.7% yoy. NEISR GDP estimate rose 0.4% in August. Trade deficit narrowed to GBP -11.6b in July versus expectation of GBP -12.1b. However, construction output dropped -0.9% mom in July. Also from Europe, German trade surplus narrowed to EUR 19.5b in July. Swiss unemployment rate was unchanged at 3.2% in August.

China exports softened as trade surplus narrowed

China's trade surplus narrowed to USD 42.0b in August, from USD 46.7B and missed expectation of USD 48.6b. Imports grew 13.3% yoy, well above expectation of 10.0% yoy. Imports also maintained July's pace at 11.0% yoy. However, exports softened and grew only 5.5%, below expectation of 6.0% yoy and notably slower than July's 7.2% yoy. China's foreign current reserves rose for a seven straight month in August. Reserves jumped USD 10.81b to USD 3.092T. But the number was well below economists expectation of USD 19b.

Also from Asia Pacific, Japan Q2 GDP was finalized at 0.6% qoq, down from prior estimate of 1.0% qoq and below expectation of 0.7% qoq. GDP deflator dropped -0.4% Yoy. Japan current account surplus widened to JPY 2.03T in July, bank lending rose 3.2% yoy in August. Australia home loan rose 2.9% in July. New Zealand manufacturing activity rose 3.9% in Q2.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3049; (P) 1.3082; (R1) 1.3132; More...

GBP/USD rises further to as high as 1.3223 so far and intraday bias remains on the upside for 1.3267 resistance. Break there will extend larger rally from 1.1946 to 1.3444 key resistance level next. Price actions from 1.1946 are still seen as a corrective pattern. Hence, we'd expect strong resistance from 1.3444 to limit upside to bring larger down trend reversal eventually. On the downside, below 1.3114 minor support will turn intraday bias neutral first.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern. While further rise cannot be ruled out, larger outlook remains bearish as long as 1.3444 key resistance holds. Down trend from 1.7190 (2014 high) is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.

GBP/USD 4 Hours Chart

GBP/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD Manufacturing Activity Q2 3.90% 2.80% 3.10%
23:50 JPY GDP Q/Q Q2 F 0.60% 0.70% 1.00%
23:50 JPY GDP Deflator Y/Y Q2 F -0.40% -0.40% -0.40%
23:50 JPY Current Account (JPY) Jul 2.03T 1.65T 1.52T
23:50 JPY Bank Lending incl Trusts Y/Y Aug 3.20% 3.30% 3.30%
01:30 AUD Home Loans Jul 2.90% 1.00% 0.50% 1.20%
03:00 CNY Trade Balance (USD) Aug 42.0B 48.6B 46.7B
03:00 CNY Trade Balance (CNY) Aug 287B 337B 321B
05:00 JPY Eco Watchers Survey Current Aug 49.7 49.5 49.7
05:45 CHF Unemployment Rate Aug 3.20% 3.20% 3.20%
06:00 EUR German Trade Balance (EUR) Jul 19.5B 21.5B 21.2B
08:30 GBP Industrial Production M/M Jul 0.20% 0.20% 0.50%
08:30 GBP Industrial Production Y/Y Jul 0.40% 0.30% 0.30%
08:30 GBP Manufacturing Production M/M Jul 0.50% 0.30% 0.00%
08:30 GBP Manufacturing Production Y/Y Jul 1.90% 1.70% 0.60%
08:30 GBP Construction Output M/M Jul -0.90% -0.30% -0.10%
08:30 GBP Visible Trade Balance (GBP) Jul -11.6B -12.1B -12.7B
12:00 GBP NIESR GDP Estimate Aug 0.40% 0.20%
12:30 CAD Capacity Utilization Rate Q2 85.00% 85.00% 83.30%
12:30 CAD Net Change in Employment Aug 22.2K 15.0K 10.9K
12:30 CAD Unemployment Rate Aug 6.20% 6.30% 6.30%
14:00 USD Wholesale Inventories Jul F 0.40% 0.40%