USD at 2 1/2 lows over concerns of economic fallout from Hurricane Irma as doubts that the Fed has the firepower or the will to raise interest rates again this year

China CNY currency (yuan) at strongest level since Dec 2015 (both onshore and offshore markets) on speculation the PBoC will tolerate a stronger currency

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France and UK July Industrial Production in-line with expectations



Japan Q2 Final GDP revised lower (Q/Q: 0.6% v 0.7%e; GDP Annualized: 2.5% v 2.9%e). Downward revision in annualized GDP growth was biggest under current calculation method adopted in 2010.

Japan govt official: Domestic economy continues to recover moderately as a trend, driven by domestic demand

China Aug Trade Balance registers a smaller surplus ($42.0B v $48.5Be); Components mixed (Exports Y/Y: 5.5% v 6.0%; Imports Y/Y: 13.3% v 10.0%)

PBOC set Yuan reference rate 6.5032 per USD (10th consecutive day of stronger setting with yuan fix at its strongest level since May 2016 (16-month high)


Spain Constitutional Court suspended the Catalan referendum law, as requested by PM Rajoy

Greek PM Tsipras reiterates ready and determined to exit bailout in August of 2018


Magnitude 8.0 Earth quake reported 87KM SSW of Tres Picos Mexico (near Gualamlia border) – Fed’s Dudley (voter): Reiterates balance sheet rolloff likely to start relatively soon; Don’t expect Harvey to alter trajectory of US economy. Reiterates appropriate to continue removing policy accommodation

FBI Director Wray: Have not detected any whiff of interference into Russian meddling in 2016 election

President Trump: US military action in North Korea remains option, but it’s not inevitable. Lots of good reasons to get rid of the debt ceiling. Would have done a longer deal on debt ceiling but wanted to be able to spend more on military spending

President Trump and Senate Democratic Leader Schumer said to have agreed to seek a permanent repeal of the debt ceiling under a ‘gentleman’s agreement’

US Senate has sufficient votes to move Hurricane Harvey aid/three-month debt ceiling raise bill forward (as expected). Senate approved $15.25B in disaster aid, measures to fund Govt, raise debt limit through to Dec 8thBill now moves to the House, where it is also expected to pass

Economic data

(NL) Netherlands July Manufacturing Production M/M: -0.7 v -0.3% prior; Y/Y: 3.0% v 3.3% prior, Industrial Sales Y/Y: 5.7% v 4.7% prior

(JP) Japan Aug Eco Watchers Current Outlook: 49.7 v 49.5e; Outlook Survey: 51.1 v 50.1e

(CH) Swiss Aug Unemployment Rate: 3.0% v 3.0%e, Unemployment Rate (Seasonally Adj): 3.2% v 3.2%e

(DE) Germany July Current Account: €19.4B v €20.8Be; Trade Balance: €19.5B v €21.0Be; Exports M/M: 0.2% v 1.3%e; Imports M/M: 2.2% v 2.8%e

(DE) Germany Q2 Labor Costs Q/Q: 0.3% v 0.1% prior; Y/Y: 2.3% v 2.2% prior

(FR) France July Industrial Production M/M: 0.5% v 0.5%e; Y/Y: 3.7% v 3.6%e

(FR) France July Manufacturing Production M/M: 0.3% v 0.6%e; Y/Y: 3.9% v 4.2%e

(HU) Hungary Aug CPI M/M: 0.1% v 0.0%e; Y/Y: 2.6% v 2.5%e

(CZ) Czech Aug Unemployment Rate: 4.0% v 4.0%e

(TW) Taiwan Aug Trade Balance: $5.7B v $5.5Be; Exports Y/Y: 12.7% v 12.4%e; Imports Y/Y: 6.9% v 5.7%e

(UK) BoE/TNS Aug Inflation Expectations Survey Next 12-month: 2.8% v 2.8% prior

(UK) July Visible Trade Balance: -£11.6B v -£12.0Be, Overall Trade Balance: -£2.9B v -£3.3Be, Trade Balance Non EU: -£3.8B v -£3.9B prior

(UK) July Industrial Production M/M: 0.2% v 0.2%e; Y/Y: 0.4% v 0.4%e

(UK) July Manufacturing Production M/M: 0.5% v 0.3%e; Y/Y: 1.9% v 1.7%e

Fixed Income Issuance:

(IN) India sold total INR150B vs. INR150B indicated in 2024, 2027, 2034 and 2051 bonds



Indices [Stoxx600 -0.3% at 373.7, FTSE -0.3% at 7374, DAX -0.1% at 12280, CAC-40 -0.3% at 5097, IBEX-35 -0.2% at 10108, FTSE MIB -0.4% at 21636, SMI -0.1% at 8897, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes: European Indices drift lower this morning in quiet trade as markets digest developments from the ECB yesterday. Concerns over the effect of Hurricane Irma and an Earthquake in Mexico also weigh. On the corporate front Akzo Nobel trades lower after trimming its 2017 out, as well as announcing new management structure. Safestyle trades sharply lower after a profit warning, while Greene king trade sharply low bad weather slowed sales. Air France trades higher after strong August metrics whilst, Finnair trades higher after lifting its outlook.


Consumer discretionary [SafeStyle [SFE.UK] -29% (Profit warnings), Greene King [GNK.UK] -13.4% (LFL Sales), Air France [AF.FR] +1.7% (Aug metrics)]

Materials: [Akzo Nobel [AKZA.NL] -2.1% (New management structure, trims outlook)]

Healthcare: [Cellnovo [CLNV.FR] – 5% (FDA requests further info), Erytech [ERYP] +3.7% (Positive Study)]

Energy: [Bourbon [GBB.FR] -1.6% (New management)]


ECB’s Liikanen (Finland): Reiterates General Council view that monetary policy must remain accommodative. Exchange rate can impact inflation

ECB said to have discussed 4 QE scenarios which included 6-month and 9-month extension options. To study bond buying reduction to €40B/month or €20B/month (from current level of €60B)

British Chambers of Commerce (BCC): Medium outlook for UK economy downgraded citing weaker than expected contribution from trade and subdued consumer spending. Weaker GBP currency (pound) failing to boost UK growth

China policymakers said to be worry about a rallying CNY currency (Yuan) as exporters come under strain. Pace of appreciation could not be too fast but China unlikely to intervene forcefully due to worries of criticism by US (**Note: USD/CNY has fallen by almost 8% in 2017)


USD maintains its soft tone against the major and commodity-related pairs. Dealers were looking for fresh factors to the greenback’s woes. USD was at 2 1/2 year lows against a basket of currencies. One analyst noted that the recent Hurricane Harvey and imminent threat of Irma would likely push back any additional Fed hikes. Dealers also cited comments from Fed’s Dudley who did not repeat his expectation for rate hike this year.

EUR/USD holding in the mid-1.20 area after ECB Draghi failed to jawbone the euro lower at Thursday’s policy meeting. The pair hit a 32-month high during the Asian session just under the 1.21 level

USD/CNY price action moving up to the front burner. PBoC Yuan fixing was the 10th straight for a stronger Yuan currency. Various reports noted that China official were becoming concerned with any further one-way appreciation of the yuan versus the US dollar as its would put additional pressure on China’s exports

Fixed Income

Bund futures trade at 163.26 up 8 ticks in risk aversion flows as futures hit target session highs of 163.43 to continue the upside momentum towards 163.83, to the downside 162.92 remains initial support followed by 162.53.

Gilt futures trade down 11 ticks at 128.01 having earlier hit 128.2. Yields have seen a slight lift after strong Manufacturing Data, and in line Industrial production data. Continued downside targets 127.48.

Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.775T from €1.773T and use of the marginal lending facility fell to €1.01BM from €1.04B.

Corporate issuance saw a further $10.4B via 5 issuers come to market headlined by Discovery Communications $6.3B 6 part offering which brings the weeks issuance to over $45.5B above analysts forecasts of over $30B. For the week ending Sep 6th IG Funds reported outflows of $43M, marking the first outflows seen since Mid Dec 2016.

Looking Ahead

(UR) Ukraine Aug CPI M/M: -0.2%e v +0.2% prior; Y/Y: 16.0%e v 15.9% prior

(ES) Spain July YTD Budget Balance: No est v -€13.3B prior

(MX) Mexico Aug Nominal Wages Y/Y: No est v 5.8% prior

05:30 (ZA) South Africa to sell combined ZAR800M in I/L 2029, 2033 and 2046 bonds

05:30 (PL) Poland to sell Bonds

06:00 (PT) Portugal July Trade Balance: No est v -€1.0B prior

06:00 (IE) Ireland July Property Prices M/M: No est v 1.4% prior; Y/Y: No est v 11.6% prior

06:00 (UK) DMO to sell combined £6.0B in 1-month, 3-month and 6-month bills (£2.0B, £2.0B and £2.0B respectively)

06:30 (IS) Iceland to sell Bonds – 06:45 (US) Daily Libor Fixing

07:00 (CL) Chile Aug CPI M/M: 0.3%e v 0.2% prior; Y/Y: 1.9%e v 1.7% prior

07:30 (IN) India Weekly Forex Reserves

08:00 (UK) Aug NIESR GDP Estimate: No est v 0.2% prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada Aug Net Change in Employment: +15.0Ke v +10.9K prior; Unemployment Rate: 6.3%e v 6.3% prior

08:30 (CA) Canada Q2 Capacity Utilization: No est v 83.3% prior

08:30 (US) Weekly USDA Net Export Sales

08:30 (HU) Hungary Central Bank Vice Gov Nagy

08:45 (US) Fed’s Harker speaks on Consumer Finance in Philadelphia

10:00 (US) July Final Wholesale Inventories M/M: 0.5%e v 0.4% prelim; Wholesale Trade Sales M/M: 0.5%e v 0.7% prior

11:00 (EU) Potential sovereign ratings after EU close

(PL) Poland Sovereign Debt to be rated by Moody’s

13:00 (US) Weekly Baker Hughes Rig Count data

15:00 (US) July Consumer Credit: $15.0Be v $12.4B prior

21:30 (CN) China Aug CPI Y/Y: 1.6%e v 1.4% prior; PPI Y/Y: 5.4%e v 5.5% prior

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