ECB hints at September easing


The trade deficit and the Kansas Fed's manufacturing index were the USD's only statistical problems on Thursday. In June, the trade deficit narrowed by less than expected to $74.2 billion. The Kansas Fed reported that "manufacturing activity was largely unchanged in July, while expectations for future activity remained moderately positive", yet the index fell three points to -6.

The other numbers were good. Initial and continuing jobless claims were fewer than expected and all the components of durable goods orders beat forecast. Nondefense capital goods orders excl. aircraft, which strips out the impact of grounded Boeing 737 Maxes and suchlike, increased by 1.9% on the month, smashing the 0.2% predicted by analysts.


This morning's data for German import prices, Italian consumer and business confidence and French consumer confidence had little impact on the EUR. It is almost unchanged on the day against the USD.

Yesterday's policy decision from the European Central Bank and President Mario Draghi's subsequent press conference sent the EUR bouncing around but had no long-term effect. Sig. Draghi said "this outlook is getting worse and worse", especially in manufacturing, and called on governments to play their part with fiscal policy. The interpretation of Bloomberg analysts was that "Taken together, the wording of today’s decision and press conference strengthen our conviction that the ECB will deliver a meaningful dose of stimulus in September". 


Flat oil prices were of no help to the CAD on Thursday. It is 0.4% lower on the day against the USD.

There were no Canadian economic data to hurt the Loonie. However, on the basis that the most recent statistics are of greatest importance, the CAD is still having to live with the weak retail and wholesale sales figures around last weekend.


There were no data from Britain this morning. Sterling is 0.2% lower against the USD.

Brexit has already taken its place at the top of the new government's agenda. After the Prime Minister told Parliament that he was committed to getting rid of the "Irish backstop", the EU's negotiator Michel Barnier swiftly described Mr Johnson's position as "of course unacceptable" and characterized his speech as "rather combative". None of that came as a surprise to investors but it all served to remind them that a no-deal Brexit still looms large on the radar.


In what was portrayed as a delayed reaction to expectations that the Fed will cut by 25 basis points rather than 50 next week, the JPY moved lower in New York yesterday. It is down by 0.5% on the day against the USD.

The consumer price index data for Tokyo came out overnight. Headline inflation slowed from 1.1% to 0.9%, while prices ex-fresh-food were up by 0.9% on the year, as they had been a month earlier.

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