The global financial markets continue to trade in full risk-on mode today. In particular, US futures point to sharply higher open as S&P 500 would likely take on new record high. Canadian Dollar is currently the strongest one for today, as lifted by mildly higher oil price. Australian Dollar follows as the second strongest. Euro is supported by improvement in German economic sentiment. On the other hand, Yen and Dollar are the weakest for now.

Technically, Gold is in deep correction today and selling accelerates after clearing 2000 handle. At this point, we’d look for some support from 38.2% retracement of 1670.66 to 2075.18 at 1920.65 to contain downside to bring rebound. Yen crosses are generally higher today and eyes are on 125.58 resistance in EUR/JPY and 139.23 in GBP/JPY to indicate resumption of recent rally.

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In Europe, currently, FTSE is up 2.01%. DAX is up 2.46%. CAC is up 2.80%. Germany 10-year yield is up 0.0454 at -0.480, back above -0.5. Earlier in Asia, Nikkei rose 1.88%. Hong Kong HSI rose 2.11%. China Shanghai SSE dropped -1.15%. Singapore Strait Times dropped -0.05%. Japan 10-year JGB yield rose 0.0218 to 0.032.

US PPI picked up to -0.4% yoy, core PPI at 0.3% yoy

US PPI rose 0.6% mom in July, above expectation of 0.3% mom. PPI core rose 0.5% mom, also above expectation of 0.1%. Annually, PPI climbed back to -0.4% yoy, up from -0.8% yoy, above expectation of-0.6% yoy. PPI core picked up to 0.3% yoy, up from 0.1% yoy, matched expectations.

German ZEW economic sentiment rose to 71.5, growing hope of recovery

German ZEW Economic Sentiment rose to 71.5 in August, up from 59.3, beat expectation of 55.0. That’s also the highest level since 2004. Current Situation index however, dropped to -81.3, down from -80.9, missed expectation of -69.5. Eurozone ZEW Economic Sentiment rose to 64.0, up from 59.6. But Eurozone Current Situation dropped -1.1 pts to -89.8.

“Hopes for a speedy economic recovery have continued to grow, but the assessment of the situation is improving only slowly,” comments ZEW President Professor Achim Wambach on the current expectations. “According to the assessments of the individual sectors, experts expect to see a general recovery, especially in the domestic sectors. However, the still very poor earnings expectations for the banking sector and insurers regarding the coming six months give cause for concern,” Wambach points out.

UK unemployment rate unchanged at 3.9%, but worked hours and pay tumbled sharply

UK unemployment was unchanged at 3.9% in the three months to June, better than expectation of 4.2%. As estimated 1.34m people were unemployment, -10k fewer than the previous quarter.

However, total actual weekly hours worked decreased by a record 191.3m, or 18.4%, to 849.3m hours, worst since 1971. The total hours also hit the lowest level since 1994. Additionally, there was strong falls in pay, with total nominal pay fell by -1.2% yoy and regular nominal pay fell by -0.2% yoy.

In July, claimant count jumped 94.4k to 2.7m. Since March, claimant counts has more than doubled, rose 116.8% or 1.4m.

UK BRC total sales rose 3.2%, still catching up lost ground

UK BRC total sales rose 3.2% yoy in July, second straight month of increase since the start of the coronavirus pandemic. Also, it’s above 3-month average growth of 0.4% and 12 month average decline of -1.9%. Like-for-like sales grew 4.3% yoy.

Helen Dickinson OBE, Chief Executive of BRC: “While the rise in retail sales is a step in the right direction, the industry is still trying to catch up lost ground, with most shops having suffered months of closures. The fragile economic situation continues to bear down on consumer confidence, with some retailers hanging by only a thread in the face of rising costs and lower sales.”

Australia NAB business confidence dropped to -14, deteriorated even before Melbourne stage 4 lockdown

Australia NAB Business Confidence dropped sharply to -14 in July, down from June’s 0. Business Conditions improved to 0, up from -8. Trading conditions turned position to 1 (up from -6), while profitability rose to 2 (up from -8). Employment also improved from -11 to -2 but stayed negative.

The survey was conducted prior to stage 4 lockdown in Melbourne as confidence already deteriorated of fear of the spread of the coronavirus. Alan Oster, NAB Group Chief Economist said, “while the improvement in conditions is very welcome, capacity utilisation and forward orders point to ongoing weakness overall. Therefore, with confidence still fragile there is some risk that conditions lose some of their recent gains in coming months.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 105.71; (P) 105.96; (R1) 106.20; More...

USD/JPY strengthens mildly but stays below 106.47 temporary top. Intraday bias remains neutral and the bullish case is still in favor. That is, corrective fall from 111.71 has completed with three waves down to 104.18, after missing 100% projection of 111.71 to 105.98 from 109.85 at 104.12. On the upside, above 106.47 will target 108.16 resistance next. Nevertheless, break of 104.18 will extend the whole decline from 111.71 instead.

In the bigger picture, USD/JPY is still staying in long term falling channel that started back in 118.65 (Dec. 2016). Hence, there is no clear indication of trend reversal yet. The down trend could still extend through 101.18 low. However, sustained break of 112.22 should confirm completion of the down trend and turn outlook bullish for 118.65 and above.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:01 GBP BRC Retail Sales Monitor Y/Y Jul 4.30% 10.90%
23:50 JPY Bank Lending Y/Y Jul 6.30% 6.50% 6.20%
23:50 JPY Current Account (JPY) Jun 1.05T 1.00T 0.82T
01:30 AUD NAB Business Confidence Jul -14 1 0
05:00 JPY Eco Watchers Survey: Current Jul 41.1 46.6 38.8
06:00 GBP ILO Unemployment Rate (3M) Jun 3.90% 4.20% 3.90%
06:00 GBP Average Earnings Including Bonus 3M/Y Jun -1.20% -1.20% -0.30%
06:00 GBP Average Earnings Excluding Bonus 3M/Y Jun -0.20% -0.10% 0.70%
06:00 GBP Claimant Count Change Jul 94.4K 9.7K -28.1K
09:00 EUR Germany ZEW Economic Sentiment Aug 71.5 55 59.3
09:00 EUR Germany ZEW Current Situation Aug -81.3 -69.5 -80.9
09:00 EUR Eurozone ZEW Economic Sentiment Aug 64 55.3 59.6
10:00 USD NFIB Business Optimism Index Jul 98.8 105.9 100.6
12:30 USD PPI M/M Jul 0.60% 0.30% -0.20%
12:30 USD PPI Y/Y Jul -0.40% -0.60% -0.80%
12:30 USD PPI Core M/M Jul 0.50% 0.10% -0.30%
12:30 USD PPI Core Y/Y Jul 0.30% 0.30% 0.10%

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