Intraday Market Thoughts

Disinflation, Disinterest and Disappointment in Global Growth

by Adam Button
Aug 14, 2013 23:06

Simmering inflation fears and a surprising warning about the global economy grabbed the spotlight Wednesday. The pound and kiwi were the best performers on the day while the Swiss franc lagged. Aussie inflation expectations highlight a middling calendar and Thursday is the Assumption Day holiday in large parts of Europe so it will be especially quiet.

The market is increasingly focusing on inflation numbers, especially with US CPI coming on Thursday. The Fed's Bullard warned that the officials could lose credibility if they can't bring inflation up to 2%. On the other hand, he said stimulus risks long-term inflation.

The disinflation side gained some leverage on Wednesday with the year-over-year producer price index at 2.1% compared to 2.4% expected. The dollar easer lower on the numbers, a sign that traders are starting to pay attention.

The bigger news might have been from computer networking equipment maker Cisco after the stock market close. The company has access to leading edge data on global corporate investment spending and CEO John Chambers was sour on the global economy cutting 5% of his workforce. He said the recovery continuing slowly but it was more inconsistent than expected.

On the day, trading was sluggish. Cable sprung to life on the strong claimant count numbers but US trading was slow. AUD/USD raised some eyebrows partway through the session as it quickly climbed to 30 pips to 0.9160 but the move stalled and it slipped back to 0.9125.

Looking ahead, a series of low-tier indicators are on the Asia-Pacific calendar but nothing likely to move markets. One to watch comes at 0100 GMT with August Australian consumer inflation expectations. A quick fall from the 2.6% July reading might put another rate cut on the table.

In addition to the existing EURUSD, GBPUSD and EURGBP trades, we added 2 new EURCHF trades and 2 EURCHF charts (W & M), based on converging momentum positivity across various timeframes. All the trades are in the latest Premium Insights.
Act Exp Prev GMT
Consumer Inflation Expectation (AUG)
2.6% Aug 15 1:00
PPI (JUL) (m/m)
0.0% 0.3% 0.8% Aug 14 12:30
PPI ex Food & Energy (JUL) (m/m)
0.1% 0.2% 0.2% Aug 14 12:30
PPI (JUL) (y/y)
2.1% 2.4% 2.5% Aug 14 12:30
PPI ex Food & Energy (JUL) (y/y)
1.2% 1.4% 1.7% Aug 14 12:30

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