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Bill Hubard’s market focus 31 August ‘17

Bill Hubard’s market focus 31 August ‘17

Bill Hubard’s market focus 31 August ‘17

Thursday, August 31, 2017 - 08:15
Bill Hubard’s market focus 31 August ‘17

High volatility this week in Euro & USD Forex

Forex movement

*     At 13.00BST, EUR/GBP is trading at 0.9241 with EUR/USD at $1.1944. GBP/USD is at $1.2924 with USD/JPY having rallied to 109.93.

North Korea

*     A United Nations Security Council statement called the latest North Korea missile shot “outrageous” and said it was a threat not only to the region, but “to all UN member states”; there was, however, NO move to toughen sanctions against the North. Kim Jong-Un said the missile flight over Japan was just a “curtain raiser”.

Germany

*     German states are releasing the August readings of their CPI, including: Saxony, +0.2% on the month and 1.9% on the year; Brandenburg, +0.1% and 1.8%; Hesse, 0.0% and 1.8%; Bavaria, +0.2% and 1.8%; and North Rhine Westphalia, +0.1% and 1.9%. The preliminary August reading of the national CPI report is due out at 13.00BSTT, it is expected to be +0.1% on the month and +1.7% on the year, on an EU harmonized basis.

*      The preliminary August reading of Germany’s EU harmonized CPI is +0.2% m/m and 1.8% y/y. This was expected to be +0.1% m/m and 1.7% y/y.

*     Based on the results of six regional states, German headline inflation increased somewhat to 1.8% y/y in August, from 1.7% y/y in July. The fourth consecutive rise of headline inflation. On the month, German prices increased by 0.1% m/m. Based on the harmonised European definition (HICP), and more relevant for ECB policy making, headline inflation accelerated to 1.8% YoY, from 1.5% following 3 months of near-stable inflation data.

European Central Bank

*     In our view, next week the ECB will probably want to play down the possible negative impact from the recent EUR appreciation on both Eurozone growth and inflation, stressing strong domestic demand and low interest rates. For the time being, the ECB will try to present the stronger euro as an achievement, namely increased attractiveness of the Eurozone, rather than a problem. When preparing its game plan for tapering, the ECB will do everything it can to avoid what the ECB itself often refers to as “unwarranted tightening of financial conditions”. ‘Dovish tapering’ and ‘tapering is not tightening’ should be the leitmotivs of the ECB’s next steps.

Hurricane Harvey

*     Hurricane (Tropical storm) Harvey, which has dumped more rain than any other storm system in US history, is back on shore; this time it is over western Louisiana. Floodwaters continue to rise in Texas.

US economic data

*     US mortgage applications were down 2.3% in the week ended 25 August, according to the Mortgage Bankers Association. Applications for Purchases were down 2.7% on the week and those for Refinancing were -2.0% on the week.

*     ADP will at 13.15BST release their estimate of the net change in August private sector non-farm payrolls, it is expected to be +185,000. The first revision of the Q2 GDP is due out at 13.30BST. Headline GDP is forecast to be revised +0.1% higher, up to +2.7%; the Personal Consumption component is expected to be revised two tenths higher to +3.0%; but the inflation indicators, the Deflator and the PCE Core are not expected to be different from the initial reports of +1.0% and +0.9%, respectively.

*     ADP estimates that in August the net change in private sector non-farm payrolls was +237,000. This was expected by Bloomberg to be +185,000.

*     At 13.20BST, EUR/GBP is trading at 0.9229 with EUR/USD at $1.1917. GBP/USD is at $1.2912 with USD/JPY having NOW rallied to 110.16.

Energy commodities

*     The weekly report on energy inventories is due out at 15.30BST. Stocks of Crude Oil are forecast to decline 1.75m/bbl, Gasoline inventories are expected to be unchanged on the week and the estimate for Distillates is +157,000.

US politics

*     Fed Governor Powell is scheduled to speak at 14.15BST about the role of Boards at large financial firms.

*     President Trump is scheduled to speak in Missouri ‘later’ today about tax reform; why the US needs it, NOT how it will happen or WHAT it will look like.

*     Q2 GDP is now said to be +3.0%. This was expected to be revised +0.1% higher to +2.7%; Q2 Personal Consumption is +3.3%. This was expected to be revised +0.2% to +3.0%; Q2 GDP Deflator is +1.0%. This was expected to be UNCH at +1.0%. Q2 PCE Core is +0.9% This was expected to be UNCH at +0.9%.

*     At 13.35BST, EUR/GBP is trading at 0.9240 with EUR/USD at $1.1908. GBP/USD is at $1.2886 with USD/JPY having rallied to 110.41.

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