31 August 2010 at 8:01 GMT
Plenty of event risks today from across the globe.
Ahead of tomorrow’s national PMI (ISM manufacturing), Chicago’s regional equivalent is one to watch Tuesday. It is highly correlated with the national PMI and consensus is looking for a sharp decline to 57 – though that would still suggest healthy expansion. It is released at 1345 GMT (watch out a few minutes ahead of the release as investors willing to pay can get a 3 minutes head start). If the Chicago PMI follows the other regional PMIs down in August we are set for a healthy decline in ISM manufacturing tomorrow though we should remain above 50.
In the eurozone, eyes should be on German unemployment numbers and prices for the entire zone. The flash estimate for CPI is generally an accurate indicator of the actual CPI number, which will be released in two weeks time. German unemployment is expected to be reduced by another 20,000 and there are no signs of an imminent slowdown in the economy (we’ll get to that later this year).
US home prices are expected to have edged higher again in June (by 0.2% MoM) fuelled by the homebuyer tax credit. While new and existing home sales have put the disrupting tax credit behind them, Case-Shiller prices are still affected as they lag sales.
The AUD momentarily halted its decline as the economy produced some better than expected numbers including building approvals at 2.3% MoM in July (-0.7% exp.) and retail sales at 0.7% MoM (0.4% exp.). In the end it was not enough though as the Aussie gave away earlier gains as negative sentiment returned again.
Vols have come small offered again in EURUSD FX options and the market seems to be without a clear direction. We expect EURUSD to keep a tight range the next couple of days with the market waiting for numbers out later this week. The EURCHF remains well bid for EUR puts/CHF calls and it is difficult to see how the ccy could avoid a further drop with RRs trading at current levels.
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