Employment statistics release and country trade talks draw attention! ~Highlights and outlook as of September 7, 2018~

◎ Economic Indicator Schedule

9/7 (Friday)

Eurozone Finance Ministers Meeting

10:30　AUDHousing Loans
15:00　EUR　Germany Trade Balance
15:45　EUR　France Trade Balance
16:30　GBP　Halifax House Price Index
18:00　EUR　Eurozone GDP
21:30　USD　Rosengren/Boston Fed President Speech
21:30　USDNFP Employment Situation・Average Hourly Earnings・Unemployment Rate
21:30　CADCanada Employment Statistics・Unemployment Rate
22:00　USDMester/Cederal Reserve Bank of Cleveland President Speech
22:00　MXN　Mexico CPI (Consumer Price Index)
23:00　CAD　Ivey Purchasing Managers’ Index

9/8 (Saturday)

01:45　USD　Kaplan/Dallas Fed President Speech
02:00　USD　Baker Hughes Rig Count
23:45　USD　Rosengren/Boston Fed President Speech

9/9 (Sunday)

Sweden General Election

◎ Today’s Focus

1）Canadian Rate Hike Expectations and NAFTA Renegotiation

According to remarks by BOC Deputy Governor Wilkins, even if NAFTA renegotiations fail, a rate hike will be considered. Last year, CAD surged after Deputy Governor comments followed by the Governor’s rate hike remarks. It wouldn’t be surprising if similar follow-up remarks appear this time as well. Also, while noting a failure of negotiations, it’s preferable that NAFTA negotiations reach an agreement. The probability of a rate hike isn’t fully priced in yet. I expect attention on future remarks and progress of renegotiations.

↓↓↓ Summary of the recent BOC statement below. Please refer. ↓↓↓

Canadian policy rate held; is a rate hike possible at the next meeting?

2）US-China Tariffs & Trade War (Japan)

This week, the third round of tariffs on China, amounting to $200 billion, was expected to be announced, but no formal statement has been issued yet. China has warned of retaliation if tariffs are imposed. The key point is the difference in import values between the US and China. The US can implement $200 billion in additional tariffs, but China likely cannot respond with tariffs of the same scale. It’s also important to watch what non-tariff retaliation might occur. (While compiling this article, I read that the next target could be Japan: refer to WSJ. I will prepare a separate note on Japan.)

3）Employment Data

Today is the employment report. The most important aspect is average hourly earnings. If job creation and average hourly earnings diverge, earnings tend to move the market. Personally, I pay more attention to Canada’s employment data than the US. As noted above, Canada is starting to price in a rate hike. Therefore, employment figures are highly important. If attention increases, moves can be large. Today, focus on Canada’s employment data.

4）Weekend Factors

Sweden election is scheduled for the weekend, but I don’t expect major impact on the FX markets (8 major currencies). Another concern is the UK. As last week, UK politics move on Sundays. With Brexit talks deadline and party conferences approaching, there’s a possibility of some news. The Canada-NAFTA talks should also be watched. I plan to adjust positions ahead of the weekend.

↓↓↓ For the UK, please also refer to the following. ↓↓↓

Pound surge then drop! The background to the Pound’s dramatic rise and fall, as the deadly currency

◎ Current Positions and Strategy

EUR/USD ShortPosition is held.Convergence of long-term Italian and German yieldsis a concern.Dollar buying has slowed as emerging market currencies settle. I want to be ready to exit early, keeping these two points in mind.

AUD/USD ShortPosition is held. Yesterday, additional information on Australian housing loans. Banks are widening their mortgage rate hikes. I’m curious about today’s mortgage rate release.AUD movement is slow, and concerns about RBA keeping policy rate unchanged due to rate hikes for mortgages. I plan to tighten stops and limits to exit early.

CAD/JPY LongNew entry. We’re long CAD after Wilkins’ remarks. Last year’s BOC hike also came after Wilkins’ remarks.We expect to price in hikes ahead of the next meeting, adopting a long-term view.Pay attention to possible comments denying a rate hike and today’s employment data. If employment deteriorates significantly, I plan to exit.

◎ Records Room

Currency strength charts, stock prices, long-term yields, and officials’ remarks are recorded here.

↓↓↓ For the September 6 entry, please refer to the following. ↓↓↓

Records Room of September 6, 2018 – Officials’ Remarks and Long-Term Yields