Daily Market Outlook, September 15th, 2021

Overnight Headlines

Democrats' tax plan would cut bills for most Americans – congressional estimate
Governor Newsom defeats California recall effort – TV networks
Biden denies China's Xi turned down meeting offer
China's factory, consumer sectors stumble on COVID-19 disruptions
China's Fujian reports new COVID-19 cases for fifth day
CN Aug Industrial Output YY, 5.3%, 5.8% f'cast, 6.4% prev; Retail Sales YY, 2.5%, 7.0% f'cast, 8.5% prev
CN Aug Urban Investment (YTD)YY, 8.9%, 9.0% f'cast, 10.3% prev
China’s house of cards – Evergrande threatens wider real estate market
China brokers drop yuan forecasts to avoid regulators’ ire – Reuters Exclusive
PBOC rolls over medium-term loans, rate unchanged for 17th month • China's new home prices grow at slowest pace in 8-mos on cooling measures, Aug YY 4.2%, 4.6% prev
Japan’s machinery orders rebound in sign of capex recovery
JP Jul Core Machinery Orders MM 0.9%, 3.1% f'cast, -1.5% prev; YY 11.1%, 15.7% f'cast, 18.6% prev
AU Sep Consumer Sentiment 2.0%, -4.4% prev
N.Korea fired possible ballistic missile amid deadlocked nuclear talks

UK annual CPI inflation data, released earlier this morning, jumped up to 3.2% in August from 2.0% in July, the highest since 2012. It was the biggest one-month increase since the series began in 1997 and was stronger than the consensus forecast for 2.9% and our prediction for 3.0%. It mostly reflected base effects on restaurant and café prices from last year’s VAT cut and the Eat Out to Help Out scheme.

The rise keeps inflation on track to meet the Bank of England’s forecast for 4% by the end of the year, with supply constraints driving up costs. Inflation is expected to fall next year, but it will certainly be something that Bank of England policymakers will want to discuss during next week’s monetary policy assessment, although many of them have also previously said that they expect rises to be temporary.

The US central bank will also provide a policy update next week as they consider when they should start cutting back their current asset purchase programme. US August CPI inflation yesterday was slightly softer than expect, with the seasonally adjusted month-on-month change at 0.3%, the smallest increase since January. The year-on-year comparison, though, remained elevated at 5.3%, but overall the report is likely to support policymakers’ expectations that this year’s inflation rise is temporary.

The main US data focus today is industrial production. Look for a relatively tame increase of 0.2% in August, down from 0.9% in July. Output in the following month (September) looks set to be affected by Hurricane Ida. Import prices and the New York Fed Empire manufacturing survey are also due. In the Eurozone, upside risks to this morning’s August industrial production figures, thanks to volatile Irish numbers, although the increase may be short-lived if supply constraints affect output. There will be focus on comments from the ECB’s Schnabel and Chief Economist Lane in separate events today

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

USDJPY - 110.00 904m. 109.70/80 916m. 109.50/60 1.35bn (1.06bn P).
EURUSD - 1.2150 976m. 1.2000/10 1.33bn (715m C). 1.1820/30 1.23bn (738m P). 1.1820 695m. 1.1750/60 514m.
AUDUSD - 0.7340/50 483m.
USDCHF - 0.9370 800m. 0.9300 400m. 0.9240 510m.
AUDJPY - 81.20 455m.
EURJPY - 131.50 411m. 128.50 420m (Call/Put spread).
USDMXN - 19.99/20.00 673m.
USDCNH - 6.49 457m. 6.43 510m.

EURUSD Bias: Bearish below 1.19 Bullish above

GBPUSD Bias: Bearish below 1.39 Bullish above.

USDJPY Bias: Bullish above 109 Bearish below

AUDUSD Bias: Bearish below 0.75 Bullish above