NZD Terms of Trade unexpectedly jump - JPY GDP, Machine Orders lower than consensus - GBP PPI lower across the board - CAD housing starts on tap
Asian and early European trading brought the EUR/USD nearly 90 points higher from a low of 1.2647, and with disappointing data out of Europe and nothing reported out of the US, it became clear that the EUR/JPY cross had its way with the markets once again.
The pair rallied to a high of 149.27 from 147.74 upon release of Japanese machine orders for the month of July, which dove the most in 20 years by a whopping 16.7% and dragged the annual rate down to -1.2%. The orders figure serves as a reflection of capital spending, and the disappointing reading indicates that exports may not be able to sustain the economic expansion the BOJ was counting on when they effectively ended ZIRP in July.
Furthermore, Q2 GDP readings didn't quite meet estimates, but the final figures were higher than preliminary reports, with annualized growth reaching 1.0% as a result of accelerated domestic demand.
Cable whipsawed in a 50 point range this morning amidst a slew of worse-than-expected reports. The UK's visible trade balance fell to a deficit of 6.338B on the back of a full 13% drop in exports, highlighting weakness in demand for UK goods. Additionally, producer prices dwindled by 1.2% in the month of August as raw material costs slipped. Furthermore, PPI output stagnated while core output declined 0.2%.
The readings don't bode well for CPI, which is set to be released tomorrow. Inflationary readings are almost a necessity for further policy tightening by the BOE, as they need far more impetus to follow through to reach a rate of 5.00% by year end.
Despite the painfully low French industrial and manufacturing sector readings, EUR/USD could find some buoyancy throughout the day as there is absolutely no US data on the agenda and with hawkish commentary from ECB Chief Economist Juergen Stark. Stark reiterated ECB President Jean-Claude Trichet's recent remarks by saying, "The strong vigilance we are exercising is a strong signal, indicating the probability of the next movement in ECB rates.
However, for December our staff economic projections will be significant in the discussions concerning increasing rates further." Can you get any clearer than that?