OPENING COMMENT
Things could start to get interesting on Tuesday with the markets now officially out of the summer and the US back to a full session after the Labor Day holiday. The Euro has been chopping around loosely between 1.4200 and 1.4400 and it remains to be seen which direction the price will go. Initial data in Asia came from the UK with BRC retail sales showing a pull back for the first time since May. In New Zealand, the value of residential building work fell to its lowest level in nearly 8 years, while non-residential also showed a drop. The slump in construction shows an economy that continues to struggle with the current financial market crisis and should help set the tone for a reserved and accommodative RBNZ on Thursday. This in conjunction with NZ English comments, in which the FinMin downplayed the strength of the single currency after saying that the rate appeared to be out of line with fundamentals, has resulted in a NZD which is the weakest performing currency on the day. Australian data was impressive with business conditions coming in at a near-six year high and exceeding expectations. However, Aussie was weighed down nonetheless on broader cross market flows and fundamentals. In Japan, data was less than impressive, with the current account surplus weaker than forecast, loan growth slowing for the 8th consecutive month and the economy watchers survey dropping. Meanwhile, the DPJ party once again affirmed that they would not step in to limit Yen gains. Gold has been a hot topic of late with the commodity nearing $1000 and helping to support the commodity bloc currencies on dips. Finally, ECB Gonzalez-Paramo was on the wires with some downbeat talk after saying that the markets could be getting ahead of themselves following the recent positive economic data. Looking ahead, Swiss unemployment (3.9% expected) is due at 5:45GMT, followed by German trade balance (11.3B expected) and current account (10.0B expected) at 6:00GMT. UK industrial production (-10.1% expected) is at 8:30GMT, with German industrial production (1.6% expected) capping things off at 10:00GMT. Global equities are slightly bid, with US equity futures pointing to a higher open right now.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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