Monday’s review

Data released: 

01:30 GMT Australia ANZ Job Advertisements (Aug) -3.2% _ -6.8%

01:30 GMT Australia Home Loans (Jul) 2.4% _ 2.6% 

01:30 GMT China Consumer Price Index (MoM) (Aug) 0.5% 0.4% 0.1% 

05:00 GMT Japan Consumer Confidence Index (Aug) 43.0 _ 43.6 

05:45 GMT Switzerland Unemployment Rate s.a (MoM) (Aug) 3.2% 3.2% 3.2% 

06:00 GMT Japan Eco Watchers Survey: Outlook (Aug) 51.2 _ 53.6 

06:00 GMT Japan Eco Watchers Survey: Current (Aug) 51.2 _ 52.3 

07:15 GMT Switzerland Real Retail Sales (YoY) (Jul) 0.8% _ 2.3% 

08:30 GMT EMU Sentix Investor Confidence (Aug) 6.5 -2.8 -4.9 

The dollar fell as Treasury two-year yields declined for a second day on speculation lower-than-forecast job growth may prompt the Federal Reserve to be less aggressive when reducing monetary stimulus. 

The Fed will taper its monthly bond purchases to $75 billion from the current $85 billion pace at its Sept. 17-18 meeting, according to the median estimate of 34 economists surveyed by Bloomberg News on Sept. 6. 

The U.S. central bank will keep purchases of mortgage-backed securities at the current $40 billion per month pace, while cutting Treasury bond buying to $35 billion per month, from $45 billion, economists said. Last month, analysts estimated the Fed would reduce purchases to $35 billion in MBS and $40 billion in Treasuries. 

The dollar weakened even as President Barack Obama intensified his campaign to persuade a reluctant American public to back military action against Syria and Bashar al-Assad threatened retaliation “direct and indirect” if the U.S. attacks. 

EURO 

After 26 months of negative readings, Eurozone Sentix Investor Confidence jumped to 6.5 in August, from -4.9 in July, Sentix GmbH informed on Monday. Analysts expected the indicator to post -2.8. 

The Bank of France sees Q3 GDP at +0.2% q/q, revised up from previous forecast of +0.1%. 

EUR/USD holds at $1.3270, consolidating after Friday’s rally, followed the weak UD jobs data. Initial resistance comes at $1.3400 (Aug 23 highs). Below $1.3100 rate may test $1.3060 (Jul 18 lows) and $1.3000 (Jul 15 lows). 

POUND 

The pound rose after British Chancellor of the Exchequer George Osborne spoke on the state of the UK economy on Monday, saying that it is “turning a corner” and underscoring the merits of the government´s austerity program for fending off the crisis. 

Chancellor said that despite the improvements in recent data, pointing to a sustained recovery, it would be unreasonable to start tightening market conditions already. 

“The only sustainable path to prosperity is to reject the old quick fixes and stick to the course we have set,” he suggested. “This is a hard, difficult road we have been following. But it is the only way to deliver a sustained, lasting improvement in the living standards of the British people.” 

This way George Osborne backed Bank of England governor Mark Carney´s forward guidance policy, according to which interest rates would remain at low levels at least until late 2016. 

GBP/USD is testing resistance at $1.5715 (Aug 21 highs). Above rate may challenge $1.5750. Initial support is near Friday’s lows on $1.5660/50 (also channel suppoort line from Jul 9), extending to Aug 30 lows at $1.5460. 

YEN 

The yen rose Monday as data released early Monday showed that the Japanese economy grew much faster in the second quarter than initially estimated. April-to-June gross domestic product grew a revised 3.8% on an annualized basis, compared with last month’s preliminary reading of 2.6%. 

Also in Japan, investors were reacting to the weekend news that Tokyo will host the 2020 Olympics, a decision that benefited the broader market, with the Nikkei Stock Average up 2.2%. 

USD/JPY holds below Y100.00 with initial support is around Y98.70 (channel line from Aug 27), ahead of Y98.00/Y97.90 (Aug 30 lows). Break above Y100.00 targets Y100.20 (Sep 5 highs), then - at Y100.80/85 (Jul 2 and 18 highs). 

COMMODITY CURRENCIES 

AUSSIE: Australia’s dollar, which is down 8.2% this year, strengthened after data showed exports rose more than expected in China, its biggest trading partner. Overseas shipments rose 7.2 percent in August from a year earlier. That compares with the 5.5% median estimate of economists and July’s 5.1% gain. 

China’s consumer prices rose 2.6% last month from a year earlier, matching the median economist estimate. 

Australia’s S&P ASX 200 moved 0.7% higher after a weekend election resulted in the country’s first conservative government in six years, bringing an end to a period of political uncertainty since the poll was called at the beginning of the year. 

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