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Yen Regains Ground as Investor Sentiments Weighed Down by Turkey and China Again

Yen regains some ground today as global markets, except US, are back in risk averse mode. Another day of selloff in the Turkish Lira is a reason for the selloff in European stocks. USD/TRY hits as high as 6.839 today and is currently up 4.76 %, 7.00 handle is within touching distance. Weakness in Chinese stocks and Asia is another factors weighing down sentiments. The US is making progress in trade negotiations with Mexico, Canada and the EU. But China as an outsider to the allies is left behind. Swiss Franc is following as the second strongest for today, Dollar as the third strongest.

Commodity currencies are generally under pressured. New Zealand Dollar was sold off earlier today on terribly bad business confidence data. Canadian Dollar also suffers some selling after Q2 GDP miss. USD/CAD surges on the back on contrasts in US and Canadian Dollar. However, it should be emphasized that 2.9% annualized growth is never a bad number for Canada. BoC is going to hike again, just a matter of September or October. And both Trump and Canadian Prime Minister Justin Trudeau expressed optimism that a trade deal can be concluded this week. So, we’d suggest not to be too bearish on Canadian Dollar.

In other markets, major European indices are all in red, with FTSE down -0.76%, DAX down -0.74% and CAC down -0.57%. EU showed friendly hands to UK on Brexit negotiation. It also indicated that auto tariffs can be scrapped if US does the same. But these positive factors are seemingly not enough to offset worries over Turkey. Earlier today Nikkei closed up 0.09%, Hong Kong HSI down -0.89%, China Shanghai SSE down -1.14% and Singapore Strait Times down -0.56%. Gold continues to trade in tight range above 1200 handle as consolidation extends.

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US PCE inflation accelerated, jobless claims stay low, Canada GDP missed

US personal income rose 0.3% in July, spending rose 0.4%, both matched expectations. Headline PCE accelerated to 2.3% yoy, up from 2.2% yoy and beat expectation of 2.2%. PCE core also accelerated to 2.0% yoy, up from 1.9% yoy and matched expectation of 2.0% yoy. Core inflation now formally meet Fed’s target.

Initial jobless claims rose 3k to 213k in the week ended August 25, below expectation of 214k. Four-week moving average dropped -1.5k to 212.25k. That’s the lowest level since December 13, 1969. Continuing claims dropped -20k to 1.708m in the week ended August 18. Four-week moving average of continuing claims dropped -4.5k to 1.73125m.

Canada data was slightly less impressive. GDP rose 0.0% mom in June versus expectation of 0.2% mom. For Q2, GDP grew 2.9% annualized, slightly below expectation of 3.0%. Exports was the main driver to Q2’s growth, up 2.9%. Consumer spending growth also rose 0.6%. However, there was deceleration in business investments, contraction in inventories and imports. The set of data doesn’t add any additional reason for BoC to hike in September instead of October.

EU Malmström willing to scrap auto tariffs if US does the same

EU Trade Commissioner for Trade Cecilia Malmström told the European Parliament’s trade committee that they are willing to scrap auto tariffs in the negotiation with the US. She noted “we said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis.”

And, “we are willing to bring down even our car tariffs down to zero … if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

But she also emphasized that it’s not about “restarting TTIP” but aiming for “a more limited trade agreement.” And more importantly, “agriculture would not be in the agreement, nor public procurement as it looks to today.”

Eurozone economic sentiment dropped for the eighth straight month

Eurozone economic sentiment dropped -0.5 to 111.6 in August, down from 112.1 and below expectation of 112.2. That’s also the eighth straight month of deterioration. Industrial confidence dropped to 5.5, down from 5.8 and below expectation of 5.5. Services confidence dropped to 14.7, down from 15.3 and below expectation of 15.2. Consumer confidence was finalized at -1.9.

Eurostats noted that “the decrease in the euro-area sentime