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US Consumer credit for July 17.713B vs 16B estimate
Prior month revised to 14.529B vs 12.320B earlier.
Dollar index erases losses but gains capped
The dollar erased losses against the other major currencies in quiet trade on Friday, as no major U.S. economic data was to be released throughout the day but gains were expected to remain limited as declined expectations for a 2016 U.S. rate hike continued to weigh.
EUR/USD fell 0.35% to 1.1220, off session highs of 1.1285.
The single currency had strengthened after European Central Bank President Mario Draghi said on Thursday that the current monetary policy is effective and the changes to the banks growth forecast are not so substantial as to warrant a decision to act.
The comments came after the central bank left its benchmark interest rate at a record-low 0.0%, in line with market expectations.
Meanwhile, sentiment on the dollar remained vulnerable as data on Thursday showing that U.S. initial jobless claims fell to a six-week low last week failed to boost optimism over the strength of the economy.
GBP/USD slipped 0.20% to 1.3269.
The U.K. Office for National Statistics reported on Friday that the goods trade deficit narrowed to £11.76 billion in July from £12.92 billion in June, whose figure was revised from a previously estimated deficit of £12.41 billion.
Analysts had expected the trade deficit to narrow to £11.75 billion.
USD/JPY rose 0.26% to 102.74, while USD/CHF gained 0.32% to trade at 0.9758.
The Australian and New Zealand dollars pushed lower, with AUD/USD down 1.01% at 0.7566 and with NZD/USD declining 0.74% to 0.7343.
Elsewhere, USD/CAD advanced 0.81% to 1.3038, the highest since September 2.
Statistics Canada reported on Friday that the number of employed people increased by 26,200 in August, beating expectations for a 15,000 rise and after a decline of 31,200 the previous month.
However, the report also showed that Canada’s unemployment rate ticked up to 7.0% last month from 6.9% in July. Analysts had expected the unemployment rate to remain unchanged in August.
The commodity currencies were also hit by declining oil prices on Friday, as investors locked in profits from the previous session’s surge sparked by data showing that U.S. crude supplies fell by the most since April 1985 last week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.39% at 95.41, off session lows of 94.81 and the highest level since September 6.
source
Dollar starts week on the back foot, risk aversion buoys yen
The dollar began the week on the back foot on Monday as a bout of risk aversion underpinned the yen, though losses were limited as the U.S. currency garnered some support on renewed talk of a possible rate hike by the Federal Reserve as early as this month.
The safe-haven yen benefited from a broad drop in equities, with Tokyo's Nikkei slipping to a two-week low. The dollar was down 0.3 percent at 102.445 yen , while the euro slipped 0.2 percent to 115.15 yen.
The currency market also kept an eye on the sell-off in global bonds, with perceived limits to central bank policies having taken German and Japanese sovereign bond yields to multi-month highs. U.S. Treasury yields have also tracked their global peers higher.
"The rise in global bond yields are being seen as a negative factor by the risk asset markets, which in turn is supporting the yen and capping the dollar," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
The Bank of Japan is now studying several options to steepen the bond yield curve, say sources familiar with its thinking, as authorities desperately seek out policy tools to revive an economy that has failed to emerge from stagnation despite years of massive stimulus.
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Fed’s Brainard Remains Cautious on Potential for Rate Increases
In comments on Monday, Fed Governor Brainard maintained a generally cautious approach surrounding the underlying economic outlook and continued to call for a very gradual removing of policy accommodation.
She stated that there had been further labour-market progress over the past few months with the amount of slack continuing to decline slowly. The increase in participation rate also suggested that there was scope to attract more workers back into the labour market with the potential for a further improvement in conditions.
Brainard remained cautious over the outlook for inflation with comments that, although inflation should gradually increase over the next few quarters, especially as the decline in non-oil import prices has been arrested, there were still concerns that inflation expectations could drift lower.
She remained concerned over the risks of insufficient demand in the economy and drew on the potential comparisons with Japan and the Eurozone with prolonged weakness in demand very difficult to correct.
There were still important concerns surrounding the global economic environment and risks of a negative impact on the US economy, especially with the tight integration of global economies. There were some positive signs surrounding investment with an increase in drilling rigs, while exports have recovered slightly in the latest quarter.
source
USD: Brainard Restores Calm for Now
Our view that Fed Governor Brainard would provide hints of a shift in thinking toward a September rate increase proved incorrect and it is clear from her speech that she believes the current labour market/inflation trade-off dynamic suggests ample scope for remaining patient in regard to raising the federal funds rate. After the 2.5% drop in the S&P 500 on Friday, the index bounced 1.5% yesterday. The dollar move was a bit more reserved, falling 0.3% yesterday after gaining 0.3% on Friday.
The modest FX moves perhaps reflect the fact that while Brainard’s comments now point to a greater chance of no action next week, the more important take-away from Fed rhetoric in recent weeks is that the FOMC is becoming increasingly divided and the chorus for reducing financial market instability risks through monetary action is getting louder. If the FOMC goes next week, the likely timing of the next action would be March or even June next year. If the FOMC now doesn’t act, the divided Fed rhetoric still leaves us potentially with two rate hikes by mid-2017 – Dec and June. So the bigger picture is perhaps not hugely different for the dollar.
We have now entered the communication blackout period ahead of the meeting next week and hence there will be little to lift the now even lower probability priced in the market for a rate increase. We estimate the probability of a rate increase is now at just 18%. We would still argue that there is justification for the Fed to act next week and believe the FOMC is putting way too little weight on the potential positive message a Fed rate hike could bring – a perception of backing away again from a relatively small 0.25-point hike only fosters further the belief that the economy is in poor shape.
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August 2016 US import prices -0.2% vs -0.1% exp m/m
Details from the August 2016 US import and export prices data report 14 September 2016
Although expected, it is the first drop in prices in 6 months.
Initial jobless claims 260K vs 265K exp
Weekly initial jobless claims data
August 2016 US PPI final demand 0.0% vs 0.1% exp m/m
August 2016 US PPI final demand
US August CPI 1.1% y/y vs 1.0% y/y expected
Highlights of the August US consumer price index
Month over month
Everything was one-tick higher than expected. That will put a bit of sprite into the steps of the Fed hawks, especially that core y/y number.
September 2016 US NAHB housing market index 65 vs 60 exp
September 2016 US NAHB housing market index 19 September 2016