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The yen lost pips to its major counterparts as a lack of fresh catalysts inspired a bit of risk appetite in the markets.

  • Japan’s flash manufacturing PMI up from 52.1 to 52.8 in August vs. 52.3 expected
  • New Zealand’s pre-Election Economic and Fiscal Update shows downgrades
  • Dollar dips on Trump’s government shutdown remarks

Major Events/Reports:

Pre-election fiscal update weighs on NZD

A few hours ago New Zealand’s Treasury printed its much-awaited pre-election fiscal update. Unfortunately for Kiwi, they didn’t contain a lot of good news.

Treasury raised its budget surplus forecast for 2016/17 from 1.62 billion NZD in the May budget to 3.71 billion NZD thanks to a one-off spike in tax revenues.

However, the office also reduced its GDP forecasts for 2016/17 from 3.2% to 2.6% and cut its 2017/18 growth projections from 3.7% to 3.5%. Finance Minister Steven Joyce pointed to a slower-than-expected growth in the six months to March, saying that it could weigh on the year’s figures.

And then there’s the labour market, where the unemployment rate is expected to fall to 4.3% by June 2020 and for annual wages to increase from $58,900 in March 2017 to $65,700 by 2021.

Unfortunately for both the National and Labour parties, the latest fiscal numbers don’t really give them much room to make voter-friendly promises ahead of the September 23 elections.

The lower GDP was enough to catch the bears’ attention, though, which is why Kiwi lost pips across the board in the early Asian session trading.

Threats of a government shutdown?

In his address to a crowd in Phoenix in the border state of Arizona, Trump promised that “We’re going to have our wall. The American people voted for immigration control. We’re going to get that wall.

Recall that Trump has asked for $1.6 billion to begin construction of the wall. This adds to the pressure on Congress, which is already pressed to pass a spending bill that would keep the government open after September 30.

Earlier this week Senate Majority Leader Mitch McConnell assured that there’s “zero chance” that the debt limit won’t be lifted, while Treasury Secretary Steven Mnuchin also promised to make the debt ceiling his priority when Congess returns in early September.

Despite the pinch, Trump promised the crowd that “If we have to close down our government, we’re building that wall,” adding that “One way or the other, we’re going to get that wall.” Too bad raiding the Highgarden isn’t an option for him!

Major Market Mover(s):

JPY

The dollar weakened against its counterparts, but it was USD/JPY that reacted the most to Trump’s remarks. In fact, the move was so strong that it dragged other yen crosses lower!

USD/JPY is down to 109.44 after hitting a session high of 109.83;
EUR/JPY is down to 128.70 after reaching 129.13;
GBP/JPY hit a high of 140.71 before settling down to 140.31, and
CHF/JPY slid from a high of 113.33 to 113.04.

NZD

The unexpected downgrades in New Zealand’s PREFU release weighed on Kiwi early in the session.

NZD/USD is down by 34 pips (-0.47%) to .7241,
NZD/JPY is down by 49 pips (+0.62%) to 79.22,
GBP/NZD is up by 83 pips (+0.47%) to 1.7709,
EUR/NZD is up by 78 pips (+0.48%) to 1.6243, and
AUD/NZD is up by 28 pips (+0.26%) to 1.0900.

Watch Out For:

  • 8:00 am GMT: ECB’s Draghi to make a speech in Germany
  • 8:00 am GMT: France’s flash manufacturing PMI (54.5 expected, 54.9 previous)
  • 8:00 am GMT: France’s flash services PMI (55.9 expected, 56.0 previous)
  • 8:30 am GMT: Germany’s flash manufacturing PMI (57.7 expected, 58.1 previous)
  • 8:30 am GMT: Germany’s flash services PMI (53.4 expected, 53.1 previous)
  • 9:00 am GMT: Euro Zone flash manufacturing PMI (56.3 expected, 56.6 previous)
  • 9:00 am GMT: Euro Zone flash services PMI expected to remain at 55.4