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The Loonie Spikes on Talk of an Imminent NAFTA Deal

Bob Mason
The Loonie was on the move at the start of the 4th quarter, with talks of an imminent NAFTA deal providing support, ahead of a busy week.

Earlier in the Day:

Economic data released through the Asian session this morning included and Australia’s September AIG manufacturing index figures and 3rd quarter Tankan survey numbers out of Japan.

For the Aussie Dollar, the AIG Manufacturing Index rose from 56.7 to 59 in September.

  • New orders rose to the highest level since March, with exports expanding at a quicker pace.
  • The employment sub-index reflected a faster pace of hiring, with the average wages sub-index showing a continued pickup in wage growth.
  • While the production sub-index reflected a quicker pace of output, the sales sub-index eased, though still considered to be at a positive level.
  • Manufacturing selling price sub-index reflected softer output price inflation, while input price inflation sub-index rose to its highest level since March 2011.

The Aussie Dollar moved from $0.7224 to $0.72286 upon release of the figures, before easing to $0.7223 at the time of writing, down 0.01% for the session.

For the Japanese Yen, the 3rd quarter Tankan Survey numbers were skewed to the negative:

  • The Tankan All Big Industry CAPEX rose by 13.4%, down from the previous quarter’s 13.6 and short of a forecasted 14.2% increase.
  • The Tankan Big Manufacturing Outlook Index stood at 19 for the 3rd quarter, which was in line with forecast, whilst sentiment deteriorated from a 2nd quarter 21.
  • The Tankan Large Manufacturers Index also stood at 19, fall short of a forecasted increase to 22 from a 2nd quarter 21. It was a 3rd consecutive decline.
  • The Tankan Large non-Manufacturers Index stood at 22 for the 3rd quarter, which was in line with forecasts, whilst down from a 2nd quarter 24.

The Japanese Yen moved from ¥113.814 to ¥113.774 against the Dollar, upon release of the figures, before falling to ¥113.85 at the time of writing, down 0.13% for the session,

Elsewhere, the Kiwi Doll was up 0.05% to $0.6622, the Kiwi managing to brush off the Sunday numbers out of China, with support coming from the previous week’s stats.

In the equity markets, with the China markets closed for the week and the Hang Seng closed for the day, it was down to the Nikkei and ASX200, which were mixed at the time of writing. The Nikkei was up 0.30%, supported by an agreement by Trump not to hit Japan with tariffs as trade talks continue, easing back from larger gains in the session. By contrast, the ASX200 was down 0.55%.

Private sector PMI numbers out of China on Sunday didn’t help the cause for the ASX200 going into the 4th quarter, with China’s September NBS Manufacturing PMI falling from 51.3 to 50.8 and the Caixin Manufacturing PMI falling from 50.6 to 50.0 reflecting a stagnation in September.

According to the September Caixin General Manufacturing PMI report, new export business reportedly fell at the quickest pace since February 2016, with company optimism at its weakest in the year, as new orders stagnated. Respondents cited the introduction of tariffs and the ongoing trade war with the U.S as the reason behind the slowdown in foreign sales.

The Day Ahead:

For the EUR, economic data due out of the Eurozone is on the heavier side, key stats including August retail sales figures out of Germany, September manufacturing PMI numbers out of the Eurozone and member states and the Eurozone’s August unemployment rate.

Focus will likely be on the manufacturing numbers, which are finalized numbers for France and Germany, any revisions to Germany’s number likely to influence, while Italy’s figures may grab more attention than usual, the markets looking for any influence from the coalition government.

The devil may ultimately be in the details, with wholesale price inflation, new orders and new export orders likely to be the main area of focus.

At the time of writing, the EUR was up 0.02% to $1.1606, today’s stats, the Italian Budget and noise from the Oval Office expected to influence.

For the Pound, economic data is limited to September’s manufacturing PMI that will provide some direction, the numbers skewed to the negative for the Pound, though Brexit chatter and noise from the Tory Party conference may overshadow the numbers, should things get hot under the collar for the British PM.

At the time of writing, the Pound was up 0.05% to $1.3037 with Brexit chatter the key driver through the day.

Across the Pond, key stats scheduled for release includes September manufacturing PMI numbers. With the Markit survey numbers being finalized figures, focus will be on the market’s preferred ISM numbers that are forecasted to be on the softer side, but still considered positive if in line with, or better than forecasts.

Outside of the numbers, FOMC members Bostic and Rosengren are scheduled to speak, any commentary in relation to the economy or policy that deviates from last week’s press conference to influence. As always trade war news will also provide direction.

At the time of writing, the Dollar Spot Index was up 0.01% to 95.138.

For the Loonie, there are no material stats scheduled for release, leaving the Loonie in the hands of NAFTA talks.

At the time of writing, the Loonie was up 0.43% to C$1.852 against the U.S Dollar, fueled by news of a NAFTA deal imminent.

This article was originally posted on FX Empire

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