Intraday Market Thoughts

Awaiting Draghi's Testimony

by Patrik Urban
Sep 3, 2012 13:14

Chinese manufacturing PMI fell & services PMI rose; Australian retail sales decline; UK manufacturing PMI rose; Swiss retail sales slowed and PMI disappointed. US celebrates Labor Day, market focus on Draghi's speech. So far on QE3, SEK, CAD, NOK & JPY are the top performing currencies vs the USD, while DKK, EUR & CHF are the worst performers.

With Jackson Hole symposium out of the way, markets will focus on this week's rate and policy decisions from the RBA, BOE and the ECB. Currencies traded in relatively narrow ranges throughout the London session and European equity indices are gaining about 0.5%.

The AUD along with the NZD have been under pressure since the Asian session after Chinese HSBC manufacturing PMI fell in August to 47.6 from previous 49.3. Chinas official manufacturing PMI fell to 49.2 from 50.1 vs expectations of 50, while official services PMI rose to 56.3 from 55.6. and Australian retail sales declined 0.8% in July after growing 1.2% in June. AUDUSD and NZDUSD trade near session lows around 1.0245 and 0.7980 respectively.

GBP trades higher across the board after UK manufacturing PMI bested expectations in August and rose to 49.5 from July's 45.2. The pace of contraction for production, new orders and new exports eased sharply and input prices continued to decline. Despite the improvement, the underlying picture has not changed as the sector remained in a contraction following a steep decline in July. GBPUSD rose to 1.5890 and EURGBP fell to 0.7910.

Swiss retail sales slowed in July to 3.2% from previous 3.3% y/y, SVME PMI declined in August to 46.7 from 48.6 and SNB chairman Thomas Jordan predictably reiterated that the SNB will continue to enforce the minimum exchange rate against the EUR.

Spanish manufacturing PMI reached in August the highest level since March at 44 from previous 42.3. On the other hand Italian PMI fell to 10 months low at 43.6 from 44.3. Spanish 10 year yield declined from 6.91% to current 6.84%.

US and Canadian banks are closed today in observance of Labor Day. There are no reports due during the US session but markets are likely to respond to the ECB president Draghi's testimony before the economic committee in Brussels at 9:30 am ET.

Here is Ashrafs piece looking onto BEYOND Jackson Hole.


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