Morning Forex Fundamental

USD

Claims have 'moved sideways most of the year' - Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC

U.S. jobless claims unchanged; personal spending rises

Impact high

The number of Americans claiming for unemployment benefits was unchanged at 374,000 in the week ended August 25 from the week before, said the Department of Labor on Thursday.

Claims have 'moved sideways most of the year,' said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. 'Hirings are what's lacking at this point.'

Also Thursday, the Bureau of Economic Analysis said personal spending increased in July for the first time in three months. Purchases climbed 0.4 per cent, after being little changed in June.

The consumer's situation is slowly improving, but the job growth isn't there to support really big gains in future spending,' said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh.

The Standard & Poor's 500 declined 0.78% to 1,399.48. The Dow Jones Industrial Average retreated 0.81%, or 106.77 points, to 13,000.71. The Nasdaq Composite lost 1.05%.

EUR

'The good [Italian] auction reflects that there are expectations that the ECB will come up with some sort of solution' - Jesper Berg, senior vice president at Nykredit's regulatory affairs and ratings division

Italian debt auction sees strong demand

Impact High

Italy placed 6.5 billion euros of 10-year and 5-year debt in an auction on Thursday. Yields on the 10-year bond declined to 5.82 per cent from 5.96 per cent at a previous auction. Yields on the 5-year bond fell to 4.73 per cent from 5.29 per cent.

'The good auction reflects that there are expectations that the ECB will come up with some sort of solution. It probably won't be anything that finishes the crisis, but something that is a step in the right direction,' said Jesper Berg, senior vice president at Nykredit's regulatory affairs and ratings division in Copenhagen.

'It was reassuring that the country did not have any difficulties finding demand for its new 10-year benchmark, even though the upcoming ECB's bond-purchase program is set to be targeted only on [short-dated debt],' said Jan von Gerich, chief strategist at Nordea.

The Stoxx Europe 600 Index erased 0.76 per cent to 264.97. Germany's DAX Index fell 1.64 per cent and France's CAC 40 Index slid 1.02 per cent.

GBP

'Mortgage activity remains very close to record low levels since early 2010, a sign that the housing market is struggling to improve' - Annalisa Piazza, an analyst at Newedge Group

U.K. mortgage approvals rise

Impact High

The number of approved mortgages rose to 47,312 in July from a 18-month low of 44,124 in June, Bank of England data showed on Thursday. Analysts expected approvals to climb to 47,000.

'Mortgage activity remains very close to record low levels since early 2010, a sign that the housing market is struggling to improve,' said Annalisa Piazza, an analyst at Newedge Group in London.

'It will take a few months to see the effects of the additional policy accommodation. Until then, we expect housing activity to remain very subdued.'

The FTSE 100 Index declined 0.42 per cent to 5,719.45. The broader FTSE All-Share Index edged lower to 2,973.11.

CHF

'We go into the Jackson Hole conference with the market adjusted to more reasonable expectations of what Ben Bernanke will deliver' - Chris Weston, an institutional trader at IG Markets in Melbourne

Swiss stocks declined on Thursday

Impact: Medium

Swiss stocks fell on Thursday ahead of Federal Reserve Chairman Ben Bernanke speech at Jackson Hole Symposium.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies fell 0.68% to 6,378.29. The broader Swiss Performance Index declined to 5,892.47.

'We go into the Jackson Hole conference with the market adjusted to more reasonable expectations of what Ben Bernanke will deliver,' Chris Weston, an institutional trader at IG Markets in Melbourne, wrote in a note to clients.

'With expectations lowered and consensus calling for limited real market moving rhetoric from Bernanke, perhaps this is the time when the potential for volatility can be at its greatest and a surprise could be in store.'

JPY

'Looking ahead, Japan's economy will probably lose steam' - Kohei Okazaki, an economist at Nomura Securities Co.

Japan's industrial production unexpectedly declines

Impact: Medium

Japan's industrial production unexpectedly tumbled in July, said the Trade Ministry on Friday. Production retreated 1.2 per cent from June, when it rose 0.4 per cent.

'This could indicate that the trade balance won't be recovering for the time being, which could be considered a yen-weakening factor,' said Daisuke Karakama, market economist and vice president of Forex sales at Mizuho Corporate Bank.

'Looking ahead, Japan's economy will probably lose steam,' said Kohei Okazaki, an economist at Nomura Securities Co. in Tokyo. 'Overseas demand is slowing, affecting production and capital spending.'

The Nikkei 225 Stock Average retreated 1.60 per cent, or 143.87 points, to 8,839.91. The broader Topix Index tumbled 1.63 per cent, or 12.15, to 731.64.

Press Review

Europe

Eurozone's services and manufacturing output contracted for a seventh month in a row in August, with region's PMI Index rising to 46.6 from 46.5 in July. Any reading below 50 indicates contraction.

The 'troika' is to decide whether Greece is to receive its next tranche worth 31.5bn euros in order to stay in the Eurozone and avoid default or not.

Brussels Pushes For Wide ECB Powers

http://www.cnbc.com/id/48855050

The European Central Bank would be given sweeping authority over all 6,000 euro zone banks under a plan being drawn up by the European Commission, putting Brussels on a collision course with Germany and the ECB itself, which have urged a more decentralized first step towards 'banking union'.

Euro-Zone Confidence Falls

http://online.wsj.com/article/SB10000872396390444914904577620832384384256.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews

Confidence among euro-zone consumers and businesses fell to its lowest level in three years in August, official data showed, suggesting economic weakness in the debt-saddled currency bloc will continue, and is likely to spread further to core economies, such as Germany.

USA

The number of Americans claiming for jobless benefits rose by 4,000 to 372,000 and reached a one-month high in the week ended August 18. Meanwhile, employers added 163,000 workers in July, the biggest gain since February.

Minutes released by the Fed on August 22 point at a higher possibility of a next round of quantitative easing in September.

Dallas Fed Warns Against 'Ultra Easy' Money

http://www.businessweek.com/articles/2012-08-30/dallas-fed-warns-against-ultra-easy-money

Federal Reserve Chairman Ben Bernanke, slated to speak Aug. 31 at the annual monetary policy conference in Jackson Hole, Wyo., is under pressure from the hawkish flank of the Fed not to make monetary conditions even easier.

A new report from the Federal Reserve Bank of Dallas—whose president, Richard Fisher, is reliably hawkish—warns that 'there are limits to what central banks can do.'

Romney Can Take His Dad's Idea and Cut Mortgage Tax Break

http://www.bloomberg.com/news/2012-08-30/romney-can-take-his-dad-s-idea-and-cut-mortgage-tax-break.html

Side with us, or lose a house. That's essentially what Gary Thomas, president-elect of the National Association of Realtors, was saying this week at the Republican convention when he warned against the elimination of the mortgage-interest deduction.

Asia & Pacific

Chinese manufacturing activity contracted further in August, showed a survey conducted by HSBC Holdings PLC. An index measuring factory output fell to 47.8 from 49.3 in July.

Japan recorder larger-than-expected trade deficit of $6.53 billion in July, Japan's Ministry of Finance data showed. Nation's exports lost 1.1% from June, while imports dipped 0.9% the same month.

India Growth Beats Estimates After Rate Cut To Aid Spending

http://www.bloomberg.com/news/2012-08-31/india-growth-beats-estimates-after-rate-cut-to-fight-europe-risk.html

India's economy grew more than estimated last quarter after the central bank cut interest rates to support spending at home. Bonds fell while the rupee and stocks pared losses.

Asian shares hit 4-week low before Bernanke speech

http://www.reuters.com/article/2012/08/31/us-markets-global-idUSBRE86F00620120831

Asian shares fell to four-week lows on Friday as investors cooled expectations that U.S. Federal Reserve Chairman Ben Bernanke will offer any signal of more monetary stimulus at a speech before fellow central bankers later in the day