• Sweden’s Riksbank raises key repo rate to 0.75% from 0.5%
• French Q2 ILO jobless rate falls to 9.7%, better than median forecast of 10%
• Japan’s Ozawa:  FX intervention just by Japan may not have much effect, but should be prepared to act
• Swiss Q2 real GDP +0.9% q/q, +3.4% y/y, better than median forecasts +0.8%, +2.7% respectively
• Nationwide UK August house prices -0.9% m/m, +3.9% y/y. Much weaker than median forecasts of -0.3%, +4.9% respectively
• UK construction PMI 52.1 in August, down from 54.1 in July.  Much weaker than median forecast of 53.2
• Euro zone Q2 GDP confirmed at +1.0% q/q.  Revised up to 1.9% y/y from previous 1.7%
• Swiss retail sales +4.8% y/y in July, better than median forecast of +2.3%
• Spanish/German 10 year government bond yield spread fall to 169 bps . Lowest since August 20

Not too much going on. Sterling has had a poor morning, underminned by poor house price, construction PMI data.  Swissy on the flip side has had good morning,  underpinned by good  Q2 GDP, retail sales data.

EUR/USD firmer on day, up at 1.2825 from early 1.2790.  The pairing did suffer a bit of a swoon posting a session low 1.2777, but ready buyers emerged.  The sell-off seemed to coincide with announcement of Swedish rate hike, which saw heavy selling of the EUR/SEK cross.

Asian central bank and hedge funds notable buyers below 1.2800 this morning.  On the topside sell orders noted at 1.2830/50 and they’ve helped cap rally attempts at 1.2838 so far.

Cable down at 1.5400 from early 1.5445.  Poor UK house price/construction PMI data have weighed on sterling.  Real money buyer seen around 1.5375 low helping lend much-needed support.

EUR/GBP up at .8325 from early .8280, but sell orders noted at .8330/50 have capped topside at .8338 so far.

EUR/CHF down at 1.2980 from early 1.3015 having been as low as 1.2945 at one stage.  Swissy supported by strong GDP/retail sales data.  UK clearer notable seller in very early trade.

USD/JPY unchanged at 84.18.  Got as low as 84.01 before decent buying from a Dutch bank lent much-needed support.  The Danish bank, who has been notable buyer of late, was also said to have been in buying again.

• ADP employment report: US private sector lost 10,000 jobs in August
• ISM rises to 56.3.; much stronger than expected
• Fed’s Plosser downplays utility of MBS reinvestment; opposes more QE without clear deflation dangers
• Fed’s Fisher: Ball in Congress’s court; Fed has done all it can
• S&P jumps 3.0% after ISM surprise
• US bonds slump, yields rise sharply after data; 10-yr notes up 11 bp to 2.58%

US markets opened in a risk-loving mood this morning after strong Australian and Chinese data. The mood was dimmed briefly by the downbeat ADP data which foretells a weak employment report on Friday but the expectation that the Fed will crank up the printing presses should the economy keep deteriorating limited the damage.

The EUR/USD took center stage in early New York dealing as a 1.2550/1.2850 came into play shortly after the ADP data. We rallied as high as 1.2856 before falling back after the ISM report.

Focused turned from EUR pairs to commodity plays as the best of the risk-loving strategies. In fact EUR/CAD selling was a factor in the dip in EUR/USD off the highs in addition to a rise in US bond yields. EUR/USD finds support in the short-term at the 1.2780 level. Small stops are eyed below that level. Steady real-money interest was noted to buy EUR/USD in very quiet afternoon markets.

USD/JPY jumped ahead of the data on talk of a bullish analysis by a noted NY think-tank and really took off after ISM. We jumped to the 94.67 level before sell orders from Japanese exporters were able to cool the rally. Japan missed a golden opportunity to take USD/JPY higher right after the data…

Dips were relatively shallow with most afternoon dealings in the 84.40s. It is a decent close considering after ADP were close to trend lows, slipping to 83.66.

Commodity currencies extended their gains after ADP with AUD nearing the 0.9100 level late in the day. USD ?CAD dipped below 1.05 and ends at 1.0510.

EUR/CHF and USD/CHF saw significant short-covering after the ISM data greatly lessened risk aversion. EUR/CHF ends at 1.3000 from 1.2916 NY lows. It reached 1.3040 on a squeeze. USD/CHF jumped from 1.0066 session lows to 1.0183 intraday and ends the session at 1.0155.

The first three hours of the US trading were fairly chaotic but markets barely budged through the afternoon hours, apparently content to wait for further clues on the economy. Improved claims and payrolls will keep the risk rally rolling while bad news on both will prompt renewed fears that the Fed will need to take further action.

• China’s passenger car sales rose 59.3% y/y in August, marked improvement from the 15.4% y/y rise seen in July
• Departing White House economist Romer:  US budget deficit cannot be excuse for leaving unemployed to suffer. US has tools that would bring unemployment rate down, must find will to use them
• Currency trading growth slowed amid crisis, BIS says
• German July retail sales -0.3% m/m, +0.8% y/y, weaker than median forecasts of +0.5%, +1.4% respectively
• Swiss PMI for August 61.4, demonstrably weaker than median forecast of 66.0
• Euro zone final manufacturing PMI for August 55.1, fractionally up from flash 55.0, but down from 56.7 in July and lowest read since February
• UK manufacturing PMI for August 54.3, demonstrably weaker than median forecast of 57.0. Lowest read since last November
• Spanish/German 10 year govt bond spread narrows to 177 bps from 186 bps at Tuesday settlement. Italian/German 10 year govt bond spread narrows to 158 bps from 165 bps at Tuesday settlement
• German FinMin: Sees little sign of higher interest rates in foreseeable future. Greece deserves respect for its efforts on budget consolidation

EUR/USD started around 1.2700 and made an orderly ascent in early trade. The overnight release of good Australian Q2 GDP  and Chinese August PMI data had set the tone.   The momentum increased as European stocks extended their gains, and stops through 1.2750 and 1.2780 were triggered on way to session high 1.2812.

Middle Eastern selling, probably including sovereign interest, has been noted above 1.2800. 

Cable at 1.5380 effectively unchanged on the day.  Early rally floundered after running into well noted sell orders up at 1.5415/25.  The release of demonstrably weaker UK manufacturing PMI has served to inhibit cable gains, despite the generally better risk sentiment which would usually lift the pairing. 

EUR/GBP UP AT .8316 from early .8255, with major Swiss commercial bank notable buyer of the cross after the weak PMI data.

EUR/CHF up at 1.2972 from early 1.2900, underpinned by the better risk sentiment, swissy losing a little of it’s safe haven premium. 

USD/JPY down at 84.00 from early 84.35, garnering absolutely no support from the better risk environment.  A touch worrying. Well not if you’re short I guess. 

AUD/USD up at .9055 from early .8975, underpinned by better risk sentiment.  Stops tripped through .9040 on way to .9061 session high.  More stops noted through .9080.

• Australian Q2 GDP +1.2%, fastest growth in 3 years
• Australian stockmarket rises 2%
• China’s official August PMI 51.7
• HSBC China PMI 51.9, up from 49.4
• Australia July manufacturing index 51.7
• Spain’s Zapatero: Debt auctions show that Spain can meet financing costs
• Japan PM Kan and his challenger Ozawa put forward their policy platforms; the latter supports direct FX intervention
• Regional stockmarkets rise by 0.5% or more

Risk trades have benefitted today from the strong Australian GDP numbers and also the improving Chinese PMI. AUD/JPY has risen by 1.5% and EUR/CHF has also risen by 50 pips.

USD/JPY opened the session on its lows at 84.05 but no-one was willing to stay short in fear of some direct intervention. None eventuated but the aforementioned economic data fuelled some buying of the JPY crosses. Ranges: USD/JPY 84.03/59; EUR/JPY 106.60/107.42; AUD/JPY 74.89/76.08.

The AUD has risen strongly across the board after the excellent GDP numbers and the promising Chinese PMI. Range: AUD/USD .8913/.9003.

EUR/USD has also benefitted primarily from demand in the crosses. Ranges: EUR/USD 1.2664/1.2708, EUR/CHF 1.2868/1.2925

Cable traded pretty much in line with the EUR, with the EUR/GBP cros confined to a 20 pip range. Cable 1.5337/91, EUR/GBP .8252/72.

Markets: Nikkei +0.6%, HK +0.4%, Kospi +1.3%, All Ords +1.8%. Gold $1248/oz. Oil $72.25/bbl.

• Canadian GDP slows to 2.0% in Q2; Q1 revised down to 5.8%
• ISM NY index falls to 55.6 in August from 59.4 in July
• Case Shiller home price index rises 4.2% in June y/y; strength seen fleeting
• Chicago PMI slips to 56.7 in August from62.3 in July
• MNI: ECB seen delaying exit strategy, continue providing unlimited liquidity to EU banks; worries about US economy, EU periphery cause delay
• FOMC minutes: Deflation risk small but inflation, employment levels lower than desirable for longer than expected
• S&P 500 closes nearly unchanged at 1049; holds support at 1040 again
• US bond yields close 6 bp lower at at 2.47%
• EUR/CHF closes at record 1.2870 after touching 1.2850 intraday

Month-end markets tend to be quite challenging, to put it politely, and today was no exception. Wide, unpredictable rages were the rule, not the exception today.

EUR/USD swung in a 1.2661/1.2744 range in New York. The fixing had less of an impact on the market than earlier feared, occurring about the middle of the days range near 1.2710. EUR cross selling was the main them, especially after Market News International printed  story saying that ECB sources anticipate a delay in the exit strategy through the end of 2010, at least.

Risk aversion played a role as well as EUR/CHF plummeted to 1.2850 on panic buying of Swiss from players who had previously bought dips in EUR/CHF. USD/CHF held important support at 1.0130, however.

USD/JPY rose early in the session, threatening stop-loss buy orders at the 84.70 level. Reports of buying by a handful of central banks ahead of 84.00 barriers helped sooth the nerves of dollar bulls. Selling of USD/JPY and EUR/JPY and GBP/JPY at month-end helped knock USD/JPY lower in the afternoon, down as far as 83.83. Japanese accounts were among the late-day sellers pushing the pair to its lows. EUR/JPY fell as low as 106.25 during the afternoon after a morning rally as high as 107.78.

GBP/USD was sold heavily for month-end purposes while EUR/GBP saw the traditional month-end demand.

USD/CAD rallied on weak Canadian GDP which helped raise doubts of a BOC rate hike on September 8. One and done (one more 25 bp hike to 1%) at that meeting before a long pause is now the consensus call. USD/CAD reached 1.0672 before easing but  Asian central bank buying at 1.0630 stemmed the pullback. Central bank sellers are now rumored at 1.0700.

AUD/USD was out of the spotlight today with a large fixing radar in AUD rumored overnight either flying under the radar or not materializing. 88.60/0.8920 was the New York range. We end at 0.8905.

• Japan’s MOF’s Ikeda:  Will take decisive steps against rapid currency moves. BOJ should not rule out interest rate cut to zero pct
• Ex BOJ board member Mizuno:  Counterproductive if Japan doesn’t act on its words
• Japan ruling party powerbroker Ozawa has meeting with PM Kan.  Will go ahead with challenge for party leadership.  Kan says he agreed with Ozawa to work together regardless of leadership race
• Italy business morale rises to 100.5 from 98.3 in July. Highest since May 2008
• German August s.a. jobless total -17k (vs median forecast -20k) Unemployment rate 7.6%, as expected
• Euro zone August inflation estimated at 1.6% y/y. July unemployment 10%, both as expected
• Italy s.a June retail sales +0.3% m/m, +0.5% y/y, stronger than median forecasts of +0.1%, -0.5% respectively
• UK inflation expectations for year ahead rise to 2.9% in August from 2.7% in July
• UK July mortgage approvals 48,722 vs 48,562 in June, better than median forecast of 46,500

We’ve had movement for sure, but it’s felt rather pedestrian. Maybe it’s just me? Possibly.  Morning started with risk most definitely off and the situation has slowly improved throughout the morning, with European stocks managing to pare their early losses.

EUR/USD up at 1.2690 from early 1.2655.  Inbetween we got a low as 1.2626 as European stocks swooned early.  But well-noted buy orders at 1.2600/20 weren’t tested and we gradually improved as stocks cut their losses.  So far though, euro bulls haven’t been able to take out sell orders up at 1.2690/00.

USD/JPY up at 84.50 from early 84.25.  Option barriers noted at 84.00 and 83.50, and protection of the former helped limit early slippage to session low 84.06.  Buying from major Swiss name reported in late morning trade.  Sell orders noted 84.50 through 84.80 have proved durable upside barrier so far.  

Cable down at 1.5410 from early 1.5460. Usual month end buying of EUR/GBP has helped pressure cable, but buy orders down at 1.5380/00 soaked up early pressure. Session low 1.5396.  Subsequent Middle Eastern sovereign buying has helped the pairing  just about hold above 1.5400.

EUR/GBP up at 8235 from early .8180.

• Japan’s July industrial output +0.3% MoM
• Japan’s July retail sales +3.9% YoY
• Japan’s July average wage +1.3% YoY
• UK consumer confidence in August improves to -18 from -22 in July
• UK house prices fall 0.3% MoM
• Australian retail sales +0.7% MoM against expectations for 0.4%
• Australian July building approvals +2.3% MoM
• Australian current account deficit AUD$5.6bln
• Regional stockmarkets fall by 2%

Once again movements in the FX market have been led by firstly the CHF and later on the JPY.

Two sizeable flows in EUR/CHF, firstly from 1.2990 and subsequently from 1.2960, drove this cross lower on the day as risk-aversion and the daily close below 1.30 combined to encourage fresh selling by investment funds. USD/CHF has again been unable to break below 1.0220. Ranges: EUR/CHF 1.2929/99, USD/CHF 1.0229/66.

EUR/USD broke below short-term support at 1.2660 and triggered stops, helped by the heavy selling in EUR/CHF. After bottoming out at 1.2633, the pair rebounded modestly to close the gap back to 60 on the s/t charts. Ranges: 1.2633/73

USD/JPY has drifted lower throughout the session but sizeable bids between 84.30/50 have slowed the fall. Further verbal intervention from FinMin Noda has had no impact whatsoever and it seems the market has stopped listening to them. Ranges: 84.27/66, EUR/JPY 106.63/107.19

Sterling has been unaffected by the data released earlier in the session and finishes the session close to its opening levels. Dealers anticipate heavy two-way turnover in the GBP at the month-end London fix. Ranges: Cable 1.5455/77, EUR/GBP .8172/93

The AUD has benefitted slightly from the strong retail sales data which continues to show an economy in decent shape. Ranges: .8912/56

Markets: Nikkei -2.9%, Kospi -1.2%, HK -0.8% and Shanghai -0.5%. Gold $1239/oz, oil $74.25/bbl.

• BOJ adds JPY 10 trln to fixed rate loan program to banks, lengthens tenor to six months; market disappointed.
• British Chamber of Commerce upbeat on UK outlook
• US personal income up 0.2%, spending up 0.4%; mixed, spending better than expected
• Canadian current deficit surges to C$ 11 bln in Q2; blames US
• ECB adds to bond purchases: buys EUR 142 mln last week
• Dallas Fed manufacturing index improves to -13.5 from -21
• Obama says spoke with advisers on additional steps to spur economy
• S&P 500 falls 1.4% to 1051
• US 10-year note falls 11 bp in yield to 2.54%

USD/JPY fell throughout the session, slipping to 84.51 as the US equity market slipped throughout the session. The market reaction to the BOJ tepid further easing measures was to undo all of the gains seen toward the end of last week in USD/JPY as well as much of the back-up in US yields seen on Friday. Hedge fund bids remain rumored at the 84.50 level.

EUR/JPY slid as well, dragging EUR/USD as low as 1.2659. The cross tested key support at the 127.00 level and closes on the lows.

Cable was pushed lower during the New York session with heavy selling seen from 1.5520 on down to around the 1.5460 area. Risk aversion played a major role.

USD/CAD rallied on risk aversion as well as steady demand for USD/CAD from US real money accounts. It rebounded from the 1.0480 area in early North American trade to close close to 1.0600 in thin trade. AUD ends on its lows at 0.8920.

EUR/CHF, the risk barometer of choice? It fell to the 1.2980s today and closes just below 1.3000.  USD/CHF hangs onto support ahead of 1.0220.

• NZ Trade Deficit NZ$ 186m in July
• NZ Business Confidence 16.4% in August vs July 27.90%
• BOE’s Bean: More easing may be necessary; Regulation, not monetary policy to ward off boom/bust
• Deficit Cost Declines Give Obama Stimulus Clinton Couldn’t Get, from Bloomberg
• Australia Q2 Company Gross Operating Profit +18.9% QoQ
• Australia: HIA July New Home Sales -7.00% MoM vs last -5.10% in June
• News from the BOJ saw disappointment for the market and no surprises

The opening in Asia saw the market trade higher from the US closes in expectation of news from the expected emergency BOJ meeting that took place this morning. The Nikkei in turn opened firm and at one point was up over 3.1% into lunch. Disappointment reigned as the minutes of the meeting were merely at the modest level of expectation – no change to  overnight call rate @ 0.10%; increase in the fixed rate market funds from Yen 20 to 30 trn and up to 6mths maturity. The market had bought USD/JPY up to 85.91 and EUR/JPY 109.57 in anticipation and sold off immediately to where we close the session near the lows of the day.

Ranges EUR/USD 1.2735/70 EUR/JPY 108.72/109.57 USD/JPY 85.22/91 CABLE 1.5516/60 USD/CHF 1.0271/1.0309

AUD ranged 0.8983/0.9031 after taking out stops early to push over the 0.9000 with AUD/JPY 76.60/77.53 trading with the Tokyo news

GOLD 1235.60 and OIL (Light Crude – October) 75.19

• Bernanke blazes no new monetary trails in his Jackson Hole speech; markets breath a sign of relief.
• Fed stands ready to easy further but only if economy slows significantly; Bernanke, Fed staff less fearful on growth than Wall St.
• US GDP revised down to 1.6% in Q2; smaller downward revision than expected.
• Reuters, Nikkei add to expectations that BOJ will loosen policy early next week
• ECB’s Weber: Upbeat on European growth; reaching self-sustaining recovery– CNBC
• S&P 500 rises 1.7% after bouncing from 1040 support
• US 10-yr note yield rises 16 bp in yield to 2.64%

Loads of volatility intraday as the market tried to get its head around Bernanke’s message as well as deal with sizable flows, some for month-end in thin Friday summer markets.

The market initially treated the Bernanke comments as a catalyst to reduce risk. They sold stocks, commodities (and commodity currencies) and EUR/JPY. Then just as quickly, the risk switch was flipped back on all those trend reversed and asset markets recovered a significant portion of their losses on the week.

EUR/USD fell to 1.2678 shortly after the speech only to recover to 1.2780 little more than an hour later. Stops above the 1.2760 level were triggered on the rally.

USD/JPY jumped to 85.46 after breaking through downtrend resistance at 85.37 on an intraday basis. Heavy exporter sales are seen up to the 85.50 level but another round of stops is seen just above that level.

AUD/USD was in demand by hedge funds early in the day and again at the 15:00 GMT fixing where is soared from 0.8925 to 0.8985. We end the day essentially on session highs around 0.8985.

USD/CAD was quite choppy, spiking to 1.0648 after Bernanke spoke before reversing to end the week near its lows, around 1.0520

Monday will see very thin markets with London closed for a bank holiday.

Have a great weekend all!

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