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September Inflation Numbers Put the EUR and USD in Focus

Bob Mason
It’s a busy day on the data front, with inflation numbers out of the Eurozone and the U.S the key numbers, though geo-politics will also influence.

Earlier in the Day:

Economic data released through the Asian session this morning was on the heavier side, with key stats including August building consent figures out of New Zealand, August job / applications ratio, prelim industrial production, retail sales and September inflation numbers out of Japan and Australia’s private sector credit numbers for August.

For the Kiwi Dollar, building consents surged by 7.8% in August, month-on-month, reversing most of July’s 10.3% slide. Auckland recorded a record number of new homes consented to be built according to Stats NZ.

The Kiwi Dollar moved from $0.66075 to $0.6609 upon release of the data before rising to $0.6611 at the time of writing, down 0.11% for the session.

For the Japanese Yen, while the jobs / applications ratio held steady at 1.63 in August, the rest of the stats were skewed to the positive.

Tokyo core inflation picked up from 0.9% to 1.0% in September, year-on-year, the uptick being attributed to a 3.6% rise in fuel, light and water charges, a 1.8% rise in prices for clothes and footwear and a 1.4% rise in prices for culture and recreation. There were also increases in prices for medical care, education, housing and transport and communication. Weighing on consumer prices was a 1.1% fall in prices for furniture and household utensils.

The Japanese Yen moved from ¥113.402 to ¥113.36 against the Dollar, upon release of the figures that came ahead of production and retail sales numbers.

Industrial Production fell short of a forecasted 1.5% increase, according to August prelim figures released by the Ministry of Economy, Trade and Industry, rising by 0.7% to reverse July’s 0.2% fall.

  • Industries that contributed to an increase included: Transport equipment; General-purpose, production and business oriented machinery and Plastic products.
  • Industries that mainly contributed to a decrease were: Electronic parts and devices; Chemicals (excl. Drugs) and Fabricated metals.
  • Production is forecasted to increase in September and October

Retail sales rose by 2.7% year-on-year in August, coming in ahead of a forecasted 2.2% rise and July’s 1.5% increase.

The Japanese Yen moved from ¥113.372 to ¥113.403 against the Dollar, upon release of the figures, before easing to ¥113.51 at the time of writing, down 0.11% for the session, with talks between the U.S and Japan on trade likely to lead to Japan moving more auto production to the U.S, which raises doubts on production forecasts going forward, particularly with the U.S – China trade war dragging on.

For the Aussie Dollar, private sector credit rose by 0.5% in August, month-on-month, coming in ahead of a forecasted and July 0.4% rise.

  • The increase was attributed to a 0.8% rise in business credit, following on from a 0.5% rise in July, which offset a 0.2% fall in credit for other personal use, the decline coming off the back of a 0.1% fall in July.
  • Housing credit rose by 0.4%, which was at the same pace as the previous month.

The Aussie Dollar moved from $0.72116 to $0.72141 upon release of the figures, before rising to $0.7215 at the time of writing, up 0.1% for the session.

In the equity markets, it was a reversal of Thursday’s slides, with the majors in positive territory at the time of writing, the Nikkei and CSI300 leading the way with gains of 1.7% and 0.93% respectively, while the Hang Seng and ASX200 were up 0.6% and by 0.36% respectively, support coming from overnight gains in the U.S, with the Yen at ¥113 levels supporting the Japanese markets.

The Day Ahead:

For the EUR, economic data scheduled for release through the day is on the heavier side, with key stats including French and German retail sales figures, prelim September inflation numbers out of the Eurozone and member states, finalized 2nd quarter GDP numbers out of Spain and Germany’s unemployment numbers for September.

Following Draghi’s comments in relation to an expected uptick in the rate of inflation, focus will likely be on today’s prelim numbers, though we can expect Germany’s unemployment numbers to also have an impact.

At the time of writing, the EUR was up 0.06% to $1.1648, today’s stats, the Italian Budget and noise from the Oval Office to influence.

For the Pound, it’s a busier day than normal, with key stats scheduled for release including finalized 2nd quarter GDP and business investment figures and 2nd quarter current account numbers. Forecasts are for the GDP numbers to be in line with 2nd estimates, which will be the main area of focus, any deviation to influence.

Outside of the numbers, Brexit will continue to be the main driver however, which contributed to the Pound’s pullback on Thursday.

At the time of writing, the Pound was flat at $1.3079 with Brexit chatter the key driver through the day.

Across the Pond, it’s another busy day on the data front, with key stats due out of the U.S including the FED’s preferred core PCE Price Index numbers for August, personal spending figures and Chicago’s PMI numbers for September, with finalized September consumer sentiment figures also scheduled for release.

Focus will be on personal spending and inflation, with any softer inflation numbers likely to weigh on the Dollar, FED Chair Powell having stated in Wednesday’s press conference that there was unlikely to be an overshoot.

At the time of writing, the Dollar Spot Index was up 0.07% to 94.958, today’s stats and the ever present Oval Office to provide direction through the day.

For the Loonie, while NAFTA remains the market and the Loonie’s bug bear, economic data due out this afternoon could provide some support, with July GDP and August RMPI numbers due out, forecasts skewed in favour of the Loonie.

At the time of writing, the Loonie was up 0.14% to C$1.3025 against the U.S Dollar, with the stats and NAFTA chatter to provide direction.

This article was originally posted on FX Empire

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