Sterling Surges, Yen Sinks, Dollar Flat As Bond Yields and Stocks Extend Gains

USD – Index steady ends little-changed
EUR – flat
GBP – surges on inflation climb
JPY – slumps on yield differentials
AUD – mildly lower, holds support
US S&P 500 – closes at fresh record highs
US Ten Year Treasury Yield – extends gain, up 4 basis points

Recap: Sterling rose to one year highs on higher inflation data ahead of tomorrow’s Bank Of England policy meet. The Yen sank against the Dollar as the yield on the US Ten Year bond extended gains,up 4 basis points. The Dollar Index (USD/DXY) was steady and finished little-changed. US JOLTS Job Openings rose to the highest on record.
UK Headline Annual CPI rose to 2.9% against forecast 2.8% and a previous 2.6%
UK Core Annual CPI rose to 2.7% against forecast 2.5% and a previous 2.4%.
UK Retail Price Index (Annual) rose to 3.9% against forecast 3.7% and previous 3.6%
UK PPI Input (monthly) rose to 1.6% against forecast 1.2%
UK PPI Output (monthly) rose 0.4% against forecast 0.1% and previous 0.1%
US JOLTS Job Openings: 6.17million against forecast 5.96 million and previous 6.12 million

 

US Ten Year Treasury yield ended up at 2.17% (2.13% yesterday). The yield on the German Ten Year Bund was up 6 basis points to 0.40%. The Japanese Ten Year JGB yield was up 3 basis points to 0.01%. The UK’s Ten Year Gilt yield climbed 9 basis points to 1.13%.

 

USD/DXY – closed at 91.926 from 91.948 yesterday.
USD/JPY – higher, ends at 110.17 (109.47 yesterday).
GBP/USD – surges to 1.3283 at the finish, from 1.3168 yesterday.
EUR/USD – closed at 1.1965 from 1.1958, virtually flat
AUD/USD – mildly lower, ends at 0.8018 from 0.8028 yesterday.

 

Outlook: The Dollar finished mixed against most of it’s Rivals but held steady. The US JOLTS Job Openings was the highest print ever. The Dollar Index (USD/DXY) is forming a base at the 91.00 level as better US data prints and a healthy risk appetite provide support. Yesterday US Treasury Secretary Mnuchin said that the Trump administration is still focussed on delivering tax cuts. Mnuchin also said that Janet Yellen is being considered as a candidate for the Fed presidency together with other candidates.
The political landscape in Europe is changing. In Barcelona, Spain a massive crowd of around 1 million demonstrated for Catalonian independence from Spain. The Catalonian pro-independence government holds a referendum on Oct 1 on seceding from Spain.
In France, French President Macron faces a huge task as he fights unions to liberalise the labour markets.
The Bank of England is not expected to change it’s interest rates at it’s policy meeting tomorrow. Although the higher inflation print is expected to see more dissents to the decision.
Economic Data due today:
UK August Claimant Count Change, Unemployment and Average Earnings (GMT 8.30 am, Sept 13, Local Time 6.30 pm, Sept 13): forecast for Claimant Count Change: +8,000 from -4,200; forecast for Unemployment Rate: 4.4% from 4.4%; forecast for Average Earnings: 2.3% from previous 2.1%
European Union July Industrial Production, Annual and Monthly (GMT 9 am, Sept 13/Local Time 7 pm, Sept 13) Annual forecast: 3.4% from 2.6%; Monthly forecast 0.1% from -0.6%
US Headline and Core PPI (GMT 12.30 pm, Sept 13/Local Time 10.30 pm, Sept 13): forecast Monthly Headline PPI: 0.3% from -0.1%; forecast for Annual Headline PPI: 2.5% from 1.9%; forecast for monthly Core PPI: 0.2% from -0.1%

Trading View: Expect the Dollar to consolidate it’s gains against it’s Rivals until the next set of data. The rise in the US JOLTS Job Openings to the highest on record shows strong labour demand in a tight US jobs market. Markets will continue to monitor geopolitical events. US President Trump is not satisfied with the latest UN economic sanctions on North Korea.
EUR/USD – closed little-changed at 1.1965 from 1.1958 yesterday. The overnight high traded was 1.19782. The Euro failed to trade above 1.20 and the highs are coming lower. Immediate resistance is found at 1.1980 which should hold today. The low traded at 1.19263 should see immediate support. Today sees Euro Zone Industrial Production data which is expected to see improvements. Likely range 1.1920-1.1980. The Euro can still trade lower, sell rallies.

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GBP/USD – Sterling surged to one year highs, trading to 1.3298 overnight. A strong inflation data print will most likely see an increase of dissenters to the BOE’s most likely decision outcome to leave rates unchanged on Thursday. A lot of the inflation gains have been made due to the weak Sterling rather than from the economy. The Pound’s rise was also due to short speculative market positioning against the US Dollar and Euro as well. GBP/USD has resistance at 1.3300 and 1.3320. There is short term support found at 1.3260 and 1.3240. Likely range today 1.3240-1.3300.
USD/JPY – The Dollar continues to trade on the back of the US Ten year Treasury differential with it’s Japanese counterpart. USD/JPY closed at 110.17 with the overnight high traded 110.252. Immediate resistance lies at 110.30/40. Risk appetite may have returned tension between North Korea and the US remains with both leaders not satisfied with UN sanctions. Likely range today 109.70-110.40
AUD/USD – The Aussie finished a touch lower at 0.8018 after testing 0.79984 lows overnight. The support around 0.80 cents should continue to hold today as the Aussie consolidates. Copper prices were lower but other base metals settled. Tomorrow sees Australian Jobs data for August. Immediate support lies at 0.8000 and then at 0.7980. There is resistance at 0.8050 (overnight high was 0.8049). Likely range today 0.7995-0.8045. Sell rallies.
Happy trading all …