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The USD in the Hot Seat, with Trade War Chatter and NFP Data in Focus

Bob Mason

Earlier in the Day:

Economic data released through the Asian session this morning included July household spending figures out of Japan and July home loan data out of Australia.

For the Japanese Yen, household spending came in better than expected, with a 0.1% rise year-on-year, which was better than a forecasted 0.8% fall, following June’s 1.2% slide.

  • The 0.1% rise in spending was attributed to a 13.3% rise in spending on education, a 10% rise in spending on transportation and communication and a 4.8% rise in spending on medical care.
  • The biggest drag on spending were a 10.3% slide in spending on clothing & footwear, a 1.7% fall in spending on food, a 1.4% fall in spending on housing and a 1.3% fall in spending on furniture and household utensils.
  • Household income fell by 1.6%, with disposable income falling by 2% year-on-year, weighing on outlook for spending in the months ahead.
  • Month-on-month, spending fell by 1.1%, which was better than a forecasted 1.2% decline following June’s 2.9% rise.

The Japanese Yen moved from ¥110.58 to ¥110.473 against the Dollar upon release of the figures, before easing to ¥110.6 at the time of writing, up 0.14% through the early part of the session.

For the Aussie Dollar, home loans rose by 0.4% in July, coming in ahead of a forecasted 0.1% decline following June’s revised 0.8% fall, according to figures released by the ABS.

  • Owner occupied housing loans rose by 1.3%, partially offset by a 1.3% slide in investment housing loans.
  • The number of finance commitments for the purchase of new dwellings for owner occupation fell by 2.2% in July, following a 4.7% slide in June.
  • The number of finance commitments for the purchase of established dwellings for owner occupation rose by 0.6%, following a 1% fall in June.

The Aussie Dollar moved from $0.71826 to $0.71896 upon release of the figures, before easing to $0.7188 at the time of writing, down 0.17% for the session.

In the equity markets, it was another mixed start to the day, with the Nikkei tumbling by 1.1% early in the session, weighed by the jump in the Japanese Yen back to ¥110 levels and the tech sell-off in the U.S, with the ASX200 heading for a 7th consecutive day of losses, down 0.66% at the time of writing. For the CSI300 and Hang Seng, there were some minor gains at the start of the day, the pair up 0.57% and 0.01% respectively, some support coming off the back of particularly heavy losses through the week.

The Day Ahead:

For the EUR, economic data scheduled for release this morning includes finalized 2nd quarter GDP numbers for the Eurozone, together with July industrial production and trade data out of Germany.

Barring any revisions to previous GDP estimates, focus will be on the stats out of Germany, with economic data out of Germany having disappointed this week, raising some concern over the economic outlook as trade wars wage on.

At the time of writing, the EUR was flat at $1.1623, with geo-politics and today’s stats out of Germany to provide direction.

For the Pound, stats are limited to August house price figures that are unlikely to have an impact on the Pound, with direction through the day likely to come from any Brexit chatter, the Pound having received much needed support through the week.

At the time of writing, the Pound was down 0.02% to $1.2928.

Across the Pond, it’s a big day for the Dollar, with key stats scheduled for release including August wage growth and nonfarm payroll figures. Following disappointing ADP numbers released on Thursday, the Dollar is likely to be more sensitive to the nonfarm payroll figures and the unemployment rate, though wage growth will need to maintain its recent pace, the question for the markets being whether the FED will be looking to lift rates in December should September get a green light.

Outside of the data, FOMC members Mester, Kaplan and Rosengren are scheduled to speak, any commentary on policy off the back of today’s stats also likely to influence, with the Oval Office and trade noise also there for the markets to consider through the day.

At the time of writing, the Dollar Spot Index was down 0.01% to 95.011, pulling back from gains earlier in the session.

For the Loonie, August employment figures and the Ivey PMI will provide direction this afternoon on the data front, with positive numbers likely to provide the Loonie with a boost following BoC council member Wilkins’ hawkish commentary late Thursday, though forecasts are for the unemployment rate to tick up to 5.9%, which would be a negative.

Outside of the data, NAFTA news will also be of influence through the afternoon.

At the time of writing, the Loonie was flat at C$1.3142 against the U.S Dollar, trade talks likely to be the key driver through the day.

This article was originally posted on FX Empire