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FX/RATES DAYBOOK EUROPE: USD Drops; German CPI, U.K. Jobs Eyed

(Bloomberg) — Dollar resumes drop, halting a two-day rally, after Treasury yields slipped and as traders await economic data for clues on the outlook for U.S. interest rates. The pound extends Tuesday’s gains ahead of BOE’s rate decision Thursday, where the monetary authority is seen holding rates steady. TODAY

  • U.K. jobless claims, German CPI
  • ECB’s Praet speaks

OVERNIGHT TRADING SESSIONS

  • U.S. 
    • GBP/USD rose to a new YTD high $1.3298 after the U.K.’s strongest inflation print since August 2011; USD/JPY gained past 110.00 for first time in more than a week
    • UST yields rose by 1.5bp-4bp across the curve; 10Y sector led losses, cheapening the 5s10s30s fly; stocks climbed to records
  • EUROPEAN BONDS
    • Bonds dropped on Tuesday. Were initially under pressure into Netherlands 10y supply and a weak 30y German I/L auction. Large duration syndication from Austria saw bonds sliding into the close. Gilts tumbled on strong U.K. inflation data before extending losses after heavy offers into the long- end buyback
  • ASIA TODAY
    • BBDXY down 0.2% after rising 0.7% over last two days
    • NZD falls for 2nd day; support for New Zealand’s ruling National Party surged in an opinion poll broadcast Tuesday in Wellington, putting it well ahead of the main opposition Labour Party less than two weeks before a general election
    • USD/JPY drops 0.1% to 110.04; rallied 2.1% in past two days
    • AUD/USD erases gains of as much as 0.3% after RBA board member Ian Harper says Australia’s economic growth isn’t strong enough to justify an interest-rate increase

TOP OVERNIGHT NEWS

  • In its first official response to new United Nations sanctions, North Korea said it will accelerate its plans to acquire a nuclear weapon that can strike the U.S. homeland
  • Treasury Secretary Steven Mnuchin warned the U.S. may impose additional sanctions on China — potentially cutting off access to the U.S. financial system — if it doesn’t follow through on a fresh round of United Nations restrictions against North Korea
  • President Donald Trump plans an aggressive travel schedule, taking him to as many as 13 states over the next seven weeks, to sell the idea of a tax overhaul as the administration tries to avoid repeating the communications failures of its attempt to repeal Obamacare
  • Premier Li Keqiang said China’s economy will maintain its momentum and that the leverage ratio has “decreased somewhat” as authorities push on with a drive to reduce financial risk
  • OPEC and its allies are discussing extending by more than three months the oil production cuts that expire in March 2018, potentially prolonging them well into the second half of next year in an effort to boost prices, according to people familiar with the matter
  • Currency investors risk leaving money on the table if they don’t submit claims on a $2.1 billion pot of settlement money paid by banks accused of rigging foreign-exchange rates. That’s the message from Battea FX Group LLC, which is competing in the business of advising clients on how to get their share of the payouts

KEY VIEWS

  • Demand for yen ahead of the end of Japan’s fiscal first half may taper as USD/JPY approaches 111, according to Tomohiro Nishida, FX dealer at Sumitomo Mitsui Trust Bank

ECONOMIC DATA RELEASED

  • U.S. job openings rose to 6.17m in July, est. 6m

ECONOMIC DATA (All times CET):

  • 8am: (GE) Aug. CPI EU Harmonized YoY, est. 1.8%, prior 1.8%
  • 9am: (SP) Aug. CPI EU Harmonised YoY, est. 2.0%, prior 2.0%
  • 9:30am: (SW) 2Q F GDP QoQ, est. 1.7%, prior 1.7%
  • 10:30am: (UK) Aug. Jobless Claims Change, prior -4,200
  • 10:30am: (UK) July ILO Unemployment Rate 3Mths, est. 4.4%, prior 4.4%
  • 11am: (EC) July Industrial Production SA MoM, est. 0.1%, prior -0.6%
  • 11am: (EC) July Industrial Production WDA YoY, est. 3.3%, prior 2.6%

GOVERNMENT (All times CET):

  • Sept. 10-Sept. 13: (UK) TUC Congress in Brighton
  • Sept. 12-Sept. 13: (PO) Ivory Coast President Visits Portugal
  • 9am: (EC) EU’s Juncker Delivers State of the EU Speech in Strasbourg

CENTRAL BANKS (All times CET):

  • 10:30am: (DE) Danish Cen Bank Publishes 3Q Review, Hosts 10:30am Presser
  • 4:30pm: (SW) Riksbank’s Ohlsson Gives Speech in London
  • 7pm: (EC) ECB Executive Board member Praet speaks in Frankfurt

BOND SALES/PURCHASES (All times CET)

  • For corporate bonds, see New Issue Monitor
  • 10:20am: Denmark to Sell 167-Day Bills
  • 10:20am: Denmark to Sell 77-Day Bills
  • 11am: Italy to Sell Up to EU2.5b 0.35% 2020 Bonds
  • 11am: Greece to Sell EU1.0b 91-Day Bills
  • 11am: Italy to Sell Up to EU4.0b 1.45% 2024 Bonds
  • 11am: Italy to Sell Up to EU1.5b 2.25% 2036 Bonds
  • 11:03am: Sweden to Sell SK10.0b 187-Day Bills
  • 11:15am: Switzerland to Sell 0.5% 2058 Bonds
  • 11:15am: Switzerland to Sell 0.5% 2030 Bonds
  • 11:30am: Germany to Sell EU3.0b 0.5% 2027 Bonds
  • 11:30am: U.K. to Sell GBP2.5b 1.25% 2027 Bonds
  • 11:30am: Portugal to Sell 4.125% 2027 Bonds
  • 12:30pm: Iceland to Sell 181-Day Bills

MARKETS:

  • USD/JPY -0.1% to 110.07 (range 109.98-110.29)
  • EUR/USD +0.1% to 1.1967 (range 1.1961-1.1993)
  • AUD/USD +0.2% to 0.8033 (range 0.8011-0.8039)
  • NZD/USD -0.04% to 0.7285 (range 0.7258-0.7291)
  • GBP/USD +0.2% to 1.3311 (range 1.3278-1.3311)
  • USD/CAD -0.2% to 1.2165 (range 1.2164-1.2186)
  • USD/CHF -0.2% to 0.9590 (range 0.9585-0.9608)

TECHNICAL OUTLOOK by Bloomberg strategist Michael G Wilson

  • USD/JPY – Bullish after strong close
  • Resistance: 110.61, 50-DMA; 110.67, Aug. 31 high; 111.05, Aug. 4 high
  • Support: 109.51 Sept. 11 high; 109.27 Sept. 7 high; 107.32 Sept. 8 low
  • EUR/USD – Testing trendline support
  • Resistance: 1.2015 Sept. 8 low; 1.2036 Sept. 11 high; 1.2092 Sept. 8 high
  • Support: 1.1922 Sept. 4 high; 1.1910, Aug. 2 high; 1.1823, August 31 low
  • EUR/JPY – September low may already be in place
  • Resistance: 132.32, Jan. 29 2016 high; 134.60, Dec. 4 2015 high
  • Support: 130.68, Sept. 12 low; 129.37, Sept. 6 low; 129.12 Aug. 25 low

–With assistance from Michael G. Wilson. To contact the reporter on this story: Subhadip Sircar in Mumbai at ssircar3@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Shikhar Balwani

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