Buckle Up, Doldrums are Done

The Summer doldrums end on Wednesday with a slate of FOMC speakers and key data; we look at the themes. The US dollar was the top performer while the yen lagged. Japanese industrial production and Australian private credit are up next. A new JPY trade was issued ahead of this week's busy US data schedule. The latest Premium video focuses on gold, silver, USDX, EURUSD and the Fed.

Click To Enlarge

The theme heading into September is central banking. Japan is preparing some kind of easing package (again), the Fed might hike and the ECB has been eerily quiet. With a stacked calendar coming up, trading will be more about reacting and analyzing than speculating.

As we head into the month, Fed fund futures price the chance of a hike at 32%. That's down 10 points from the frothy 42% on Monday, despite strong data. Consumer confidence rose to a 10-month high of 101.1 compared to 97.0 expected and that helped lift the dollar for the third day.

One headline that didn't get enough attention was German HICP. The flash reading for August was -0.1% compared to a +0.1% consensus. The market has given Draghi & Co a vacation this month but the pressure will ramp up soon to do more. Due tomrrow is flash Eurozone Aug CPI.

Japan is also getting a break as dollar strength helped to push USD/JPY to the highest since July 28. The market isn't entirely sure what the BoJ may roll out but look for some leaks in the weeks ahead.

Finally, the drama in oil can't be underestimated. Iran revealed it plans to add nearly another 1 million bpd of production Tuesday and that pushed down prices. The Fed puts plenty of focus on the data but a $5 decline in the price of oil before the Fed decision would be another reason to wait.

Looking at what's in the near-term calendar, Japanese July preliminary industrial production is due at 2350 and expected up 0.8% after a 2.3% rise in July. However that will still leave it down 3.0% y/y. In the same way that Japan was a monetary policy experiment, the world will be closely watching fiscal infrastructure spending in the year ahead to see if it can spur growth and private investment.

The other release to watch is at 0130 GMT when Australian private sector credit is due. The consensus is for a 6.1% y/y rise. That's the kind of number that gives a dovish RBA pause.