Dollar Rises on Risk Sentiment, Yuan Accelerates


Risk aversion sentiment dominates Asian markets today as the Chinese Yuan’s free fall accelerates. The steep depreciation could limit the government’s room for further easing monetary policy to help the economy which is still troubled by the pandemic measures. The yen and the dollar are currently the strongest in the currency markets, followed by the Swiss franc. The kiwi and the aussie are the worst with the British pound, while the euro and the Canadian are mixed.

Technically, the USD/CNY (onshore Yuan) reached its highest level since 2008 while the USD/CNH (offshore Yuan) reached an all-time high since 2011. As for the USD/CNH, it is now close to the 100% projection from 6.3057 to 6.8372 from 6.7159 to 7.2474. There is the prospect of an overshoot around the current level and the break of the support at 7.1453 will suggest that a correction is underway. However, barring government intervention, a decisive break of 7.2474 could lead to further upside acceleration towards the 161.8% projection at 7.5759, adding further pressure on Asian sentiment.

In Asia, at the time of writing, the Nikkei is down -2.05%. Hong Kong’s HSI index is down -2.34%. China Shanghai SSE is down -0.75%. The Singapore Strait Times is down -1.24%. Japan’s 10-year JGB yield is stable at 0.254. Overnight, the DOW fell -0.43%. The S&P 500 fell -0.21%. But the NASDAQ rose 0.25%. The 10-year yield rose 0.086 to 3.964, after hitting 3.992, just below the 4% handle.

Fed Kashkari: We are moving at a sufficiently aggressive pace

Minneapolis Fed Bank President Neel Kashkari said yesterday, “We are acting very aggressively. There’s a lot of crunch in the pipeline. We are determined to restore price stability, but we also recognize that, given these delays, there is a risk of overdoing it. »

“We are committed to restoring price stability, but we also recognize, given these delays, that there is a risk of doing too much up front, and so I think we are moving at a sufficiently aggressive pace. “, did he declare.

“The economy is sending us a lot of mixed signals right now,” Kashkari said. “We need to keep tightening policy until we see compelling evidence that core inflation has indeed peaked and is coming down,”

“And then I think we have to sit there and we have to pause and wait and let the tightening work its way through the economy to see at this point, have we done enough?”

Fed Harker: Housing and food inflation particularly alarming

Philadelphia Fed President Patrick Harker said in an article, “Inflation is far too high for most goods and services in our economy. But I find housing inflation, as well as food inflation, particularly alarming…. We must do everything we can to control housing inflation.

“Monetary policy has a role to play here, and the Federal Reserve is working to stabilize inflation and put the economy on a stronger long-term footing,” he said. “But getting housing inflation under control will require action not just from the Fed, but also from federal, state and local governments.”

The price of the BRC store in the UK recorded another record increase

The BRC UK store price index accelerated from 5.1% yoy to 5.7% yoy in August, hitting a new high since the index began in 2005. Food inflation is down from 9.3% y/y to 10.6% y/y. Non-food inflation also increased, from 2.9% YoY to 3.3% YoY.

Helen Dickinson, Managing Director, British Retail Consortium: “Retailers are facing huge cost pressures from the weak pound, rising energy bills and global commodity prices, high transport costs , a tight labor market and the cumulative burden of government-imposed costs.”

Mike Watkins, Head of Retailer and Business Insight, NielsenIQ: “NielsenIQ data shows that 76% of consumers say they expect to be moderately or severely affected by the cost of living crisis over the next 3 months, compared to 57 % in summer.”

Retail sales in Australia rose 0.6% month-on-month in August

Retail sales turnover in Australia rose 0.6% month-on-month to A$34.88 billion in August, slightly above expectations of 0.5% month-on-month. This is the eighth consecutive monthly increase.

Ben Dorber, head of retail statistics at ABS, said: “This month’s rise is due to the combined increase in food-related industries, with cafes, restaurants and services take-out catering up 1.3% and food retail up 1.1%.

“While households continue to spend, results from the non-food industry were mixed and contributed only a small share to the overall increase in retail turnover.”

Look forward

German Consumer Sentiment Gfk and Swiss Economic Forecast from Credit Suisse will be released during the European session. Later today, the US will release the Goods Trade Balance and Pending Home Sales.

AUD/USD daily report

Daily pivots: (S1) 0.6395; (P) 0.6454; (R1) 0.6494; After…

AUD/USD downtrend continues today and hits 0.6379 low so far. The intraday bias remains bearish. The next target is a 100% projection from 0.7660 to 0.6680 from 0.7135 to 0.6155. On the upside, minor resistance above 0.6512 will turn the intraday bias neutral and bring consolidations first, before initiating another decline.

Overall downtrend from 0.8006 (2021 high) is likely to continue as long as 0.7135 resistance holds. With a 61.8% retracement from 0.5506 (2020 low) to 0.8006 at 0.6461 firmly eliminated, the next target is the 0.5506 low. The medium term momentum will now be closely watched to assess the possibility of a breakout of 0.5506.

Economic Indicators Update

GMT Ccy Events Real Provide Previous amended
23:01 GBP BRC Shop Price Index Y/Y Sep 5.70% 5.10%
23:50 JPY BoJ Minutes
01:30 USD M/M retail sales August 0.60% 0.50% 1.30%
06:00 USD Germany Gfk Consumer Confidence Oct -38.8 -36.5
08:00 CHF Credit Suisse Economic Expectations September -56.3
12:30 USD Goods Trade Balance (USD) August P -88.0B -90.2B
12:30 USD Wholesaler stocks August P 0.40% 0.60%
14:00 USD August M/M Pending Home Sales -0.70% -1.00%
2:30 p.m. USD crude oil inventories 1.1M

Comments are closed.