USD & Yen Firm on China & Delta

The combination of FOMC members' insistence on a September taper with surging covid cases/deaths in the US is too much to take for indices. Add to it a round of weak Chinese data and it underscores risks to the outlook ahead. Another disappointing US consumer reading -- this time a larger than expected -1.1% drop in retail sales has strengthened the camps of the Fed doves. NZD was the biggest loser following fresh lockdown as a result of a new Covid case. But we think the RBNZ will still go ahead and raise rates in less than 7 hours from now.  

So the question is: will RBNZ still hike? I say  YES. and that will trigger a rally in NZD...EVEN if a dovish hike.A new Premium trade was posted moments ago, backed by 2 charts and detailed entry/target/stop.

Chinese industrial production rose 6.4% y/y compared to 7.8% expected. Retail sales were up 8.5% y/y compared to 11.5% expected.

Those are big disappointments and shortly before the data was released, the PBOC announced a 600B yuan one-year lending operation in a sign that more help could be coming.

The entire Asia-Pacific region is struggling with delta so there's no near-term turnaround on the horizon. There was a slice of good news in Japanese Q2 GDP as the consumer held up better than anticipated. People have figured out how to live (and spend) with covid restrictions but the grand 2021 reopening that everyone was hoping for isn't coming to fruition and uncertainty about what 2022 will look like is growing.

Powell's appearance had shed no fresh light on the policy debate, but Wednesday's FOMC minutes should add plenty of of detail on the thinking/discussion inside the various members' leanings towards Q4 taper. Yields fell and the yen rallied as the likelihood of a quick series of Fed rate hikes next year fades. Advanced/decline readings of major US indices are firmly swayed into the red.