Article Highlights

  • German retail sales m/m: -0.1% vs. 0.1% expected, 0.7% previous
  • French consumer spending m/m: -0.8% vs. 0.2% expected, -0.8% previous
  • Swiss KOF leading indicator: 102.7 vs. 101.4 expected, 102.6 previous
  • BOE net consumer credit: £1.84B vs. £1.40B expected, £1.60B previous
  • BOE mortgage approvals: 64.77K vs. 65.50K expected, 66.72K previous
  • Euro Zone preliminary Q2 GDP q/q: 0.3% as expected vs. 0.6% previous
  • Euro Zone preliminary Q2 GDP y/y: 1.6% vs. 1.5% expected, 1.7% previous
  • Euro Zone HICP y/y: 0.2% vs. steady at 0.1% expected
  • Euro Zone core HICP y/y: 0.9% vs. 0.8% expected, 0.9% previous
  • Euro Zone jobless rate: steady at 10.1% as expected
  • Advanced U.S. Q2 GDP estimate coming up
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Price action was a bit chaotic during today’s morning London session, but just like yesterday’s European session, the Swissy and the Kiwi were clearly in demand yet again.

Major Events/Reports:

Data dump for the Euro Zone – There was a data blitz for the Euro Zone during the morning London, but we’ll narrow them down to the one that pertained to the Euro Zone as a whole.

First up is the Euro Zone’s preliminary Q2 GDP estimate, which came in as expected at 0.3%, but is slower than Q1’s 0.6% expansion. It did outperform on an annual basis, coming in at 1.6%, which is better than the 1.5% consensus. But it’s still a tick lower than Q1’s 1.7% growth rate. Unfortunately, this is only the preliminary report, so there’s no breakdown of the GDP components.

Moving on, the preliminary year-on-year estimate for the Euro Zone’s headline inflation in July was 0.2%, beating expectations that it would flatten out, as well as the previous month’s 0.1% increase. Energy is still the main drag to inflation in the Euro Zone’s. If energy, alcohol, tobacco, and food are stripped out, we get an annual core reading of 0.9%. This is the same reading as last time and a tick higher than the 0.8% consensus.

Finally, we’ve got the Euro Zone’s jobless rate for June, and it held steady at the five-year low of 10.1%, which says a lot about the unemployment problem in the Euro Zone. Among the major Euro Zone economies, Germany had 4.9% (4.2% previous), France had 9.9% (9.9% previous), Italy had 11.6% (11.5% previous), and Spain had the worst at 19.9% (19.8% previous).

BOJ Press Conference – BOJ Shogun Haruhiko Kuroda was already under the spotlight when the morning session rolled around, thanks to the BOJ press conference after the BOJ announced further easing moves. If you somehow missed out on the BOJ’s monetary policy changes, check out Forex Gump’s write-up here.

Getting back on topic, Kuroda was asked about his outlook on the Japanese economy, and he replied that:

“Japan’s economy may see the pace of recovery slow for a while due to some weakness in exports and output. But it is then expected to continue expanding above its potential growth rate and expand moderately as a trend, with rising income driving spending among companies and households.”

Kuroda also said that the BOJ plans a comprehensive monetary policy review during the September policy meeting. But as to whether the BOJ will move further, he said that:

“Whether that will affect monetary policy decisions will depend on what the outcome of the assessment will be. The purpose of this assessment is to examine what’s necessary to achieve our 2 percent price target.”

But he also clarified that:

“We’re not announcing this based on an assumption that we will do something on monetary policy. I am aware some central banks do pre-announce monetary easing. We don’t do such a thing.”

As for implementing some form of so-called “helicopter money,” Kuroda bluntly stated that:

“Advanced economies, including Japan, do not conduct monetary and fiscal policies as a set. Such an idea, which includes direct debt underwriting by central banks, is prohibited by law. But when fiscal stimulus is expanded at a time the central bank is maintaining ultra-loose monetary policy to achieve its price target, it enhances the boost to the economy.”

Risk-on session to end the week – It looks like the European market is trying to end the week on a high note, with the pan-European FTSEurofirst 300 up by 0.42% to 1,343.96, the blue-chip Euro Stoxx 50 up by 0.38% to 2,985.00, and the DAX up by 0.39% to 10,315.50.

Market analysts are pointing to the strong performance from banking stocks for the upbeat mood, thanks to positive updates for the larger institutions like Barclays and UBS.

Major Currency Movers:

NZD – The prevalence of risk appetite was likely giving the higher-yielding Kiwi a boost, since there was no other catalyst that could account for Kiwi demand during the morning London session.

NZD/USD was up by 27 pips (+0.39%) to 0.7115, NZD/JPY was up by 22 pips (+0.29%) to 73.50, NZD/CAD was up by 33 pips (+0.36%) to 0.9367

CHF – Risk appetite was the dominant sentiment during the session, but the safe-haven Swissy managed to trump all its forex rivals.

Switzerland did get a better-than-expected reading for KOF leading indicator, but that was released early during the session and the bulk of the Swissy’s gains were captured much later, so I don’t think that’s the catalyst.

I did note in yesterday’s morning London recap that the Swissy was particularly strong, even though there was no major catalyst. Well, some analysts say that demand for the Swissy was driven by the better-than-expected earnings results for Credit Suisse (Switzerland’s second-biggest bank). And today, we got the same for UBS (Switzerland’s biggest bank), so that was likely boosting the Swissy as well.

USD/CHF was down by 46 pips (-0.48%) to 0.9739, CAD/CHF was down by 33 pips (-0.44%) to 0.7397, GBP/CHF was down by 65 pips (-0.51%) to 1.2834

Watch Out For:

  • 12:30 pm GMT: U.S. initial jobless claims (262K expected, 253K previous)
  • 12:30 pm GMT: U.S. goods trade balance (-$61.10B expected, -$60.59B previous)
  • 10:45 pm GMT: New Zealand’s building consents (-0.9% previous)
  • 11:05 pm GMT: U.K. GFK consumer confidence (-7 expected, -9 previous)

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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