USD Remains On The Defensive

Notes/Observations

• USD continues its retreat aided by retreating yields, soft US economic data and a dip in safe-haven status

Asia:

• RBA Aug Minutes: Economic recovery likely to be slower than previously expected. Coronavirus outbreak in Victoria to have major impact on domestic economy in Q3. Reiterated no need to adjust current package of measures but did not rule out adjusting package if circumstances warrant it

Coronavirus:

• Total global cases 21,826,342 (+1.0% d/d); total death toll 773,152 (-0.2% d/d)
• Germany daily coronavirus cases rise by almost 1,700 (largest rise since late April)
• South Korea govt said to be preparing stricter coronavirus restrictions in Seoul

Americas:

• Canada Fin Min Morneau resigned following allegations of conflict of interest Reports also surfaced of differences with the PM about spending on the economy during the Covid-19 pandemic
• President Trump: To create tax credits for companies that bring jobs back from China

Energy:

• OPEC Draft Report said to underline the fragility of market and uncertainty over demand; next meeting scheduled for September 16th

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.08% at 369.54, FTSE +0.04% at 6,129.88, DAX +0.11% at 12,934.70, CAC-40 +0.14% at 4,978.72, IBEX-35 +0.48% at 7,124.00, FTSE MIB +0.38% at 20,025.50, SMI -0.08% at 10,220.09, S&P 500 Futures +0.07%]
• Market Focal Points/Key Themes: European indices opened lower across the board but later turned around to trade mixed; weakness attributed to resurgence of covid cases; better performing sectors include telecom and consumer discretionary; underperforming sectors lead by financials; mining firms supported on increased price in gold; Sweden rejects NAS application for credit guarantee; BHP considering sale of assets; Veolia enters negotiations to acquire Osis from Suez; earnings expected in the upcoming US session include Home Depot, Walmart and Khol’s

Equities

• Consumer discretionary: John Wood Group [WG.UK] +8% (earnings), Clariant [CLN.CH] +5% (PE interest), Marks & Spencer [MKS.UK] -4% (trading update; job cuts)
• Industrials: Persimmon [PSN.UK] +5% (earnings)

Speakers

• ECB’s De Guindos (Spain): European banking sector unlikely to recover before 2022; Consolidation needed in sector
• Sweden NIER Think Tank Extra Business Survey noted that manufacturing companies were experiencing improvement
• German VDMA Engineering association: Q2 exports -22.9% y/y and to experience a bumpy road back to normality
• Norway Sovereign Wealth Fund Dep CEO Grande stated that had basically broken even YTD; performed well this summer
• China Foreign Ministry spokesperson Zhao Lijian reiterated opposition to US action on Huawai and labeled the US tactics as nothing short of bullying.
• South Korea govt to temporarily close clubs, karaoke bars in Greater Seoul (as speculated)
• Thailand Cabinet approved revised debt management plan that added THB214B in borrowings to account for revenue shortfall –
• Russia Energy Min Novak said to have contracted coronavirus but still to participate in Wed, Aug 19th Joint Ministerial Monitoring Committee (JMMC) meeting via conference call

Currencies/Fixed Income

• Dealers noted that negatives for the USD mostly remain in place as the greenback remained in retreat aided by retreating yields, soft US economic data and a dip in safe-haven – EUR/USD moving back above the 1.19 level with sights on possibly testing the pivotal 1.20 level. Pair at 2-year highs above 1.1915.
• Dollar hit 5-1/2-year low against Swiss franc as the pair dipped below the 0.9050 level
• USD at a 5-month low against yuan

Economic Data

• None in session

Fixed Income Issuance

• (ID) Indonesia sold total IDR9.5T vs. IDR8.0T indicated in Islamic bonds (sukuk)
• (CH) Switzerland sold CHF800M in 3-month Bills; Avg Yield: -0.742% v -0.741% prior

Looking Ahead

• 05:30 (DE) Germany to sell €4.0B in 0.00 Nov 2027 Bunds
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2026, 2032 and 2048 bonds
• 05:40 BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (IE) Ireland Jun Property Prices M/M: No est v -0.1% prior; Y/Y: No est v 0.3% prior
• 06:30 (UK) DMO to sell £2.0B in 0.625% Oct 2050 Gilts
• 06:30 (EU) ESM to sell €2.0B in 6-month bills
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Aug IGP-M Inflation (2nd Preview): 2.0%e v 2.0% prior
• 07:45 (US) Goldman Economist Chain Store Sales
• 07:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (3-7 years)
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) July Housing Starts: 1.240Me v 1.186M prior; Building Permits: 1.342Me v 1.258M prior (revised from 1,241M)
• 08:30 (CL) Chile Q2 GDP Q/Q: -13.1%e v +3.0% prior; Y/Y: -14.0%e v +0.4% prior
• 08:30 (CL) Chile Q2 Current Account Balance: No est v -$1.0B prior
• 08:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-20 years)
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 09:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (20+ years)
• 10:00 (MX) Mexico Weekly International Reserve data
• 12:00 (RU) Russia July PPI M/M: 1.1%e v 6.1% prior; Y/Y: -3.9%e v -8.3% prior
• 16:30 (US) Weekly API Oil Inventories
• 18:45 (NZ) New Zealand Q2 PPI Input Q/Q: No est v -0.3% prior; PPI Output Q/Q: No est v 0.1% prior
• 19:50 (JP) Japan July Trade Balance: -¥85.0Be v -¥269.3B prior (revised from -¥268.8B); Adjusted Trade Balance: -¥45.3Be v -¥423.9B prior; Exports Y/Y: -20.7%e v -26.2% prior; Imports Y/Y: -23.0%e v -14.4% prior
• 19:50 (JP) Japan Jun Core Machine Orders M/M: 2.0%e v 1.7% prior; Y/Y: -17.5%e v -16.3% prior
• 20:30 (AU) Australia July Westpac Leading Index M/M: No est v 0.4% prior
• 21:10 (JP) BOJ Outright Bond Purchase operation for 3~5 Years and 5~10 Years maturities
• 21:30 (KR) Bank of Korea (BOK) to sell KRW2.2T in 2-Year Bond
• 23:00 (CN) China to sell 1-year and 10-year Upsized Government Bonds
• 23:00 (KR) South Korea Q2 Household Credit (KRW): No est v 1611.3T prior