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Overnight events that maybe market moving.

1.)    Australia:

1. RBA Assistant Governor Debelle will speak.
2. Q2 current account data is expected to half from -16551M to -6500M
3. Building approvals: -.7% expected from -3.3% prior
4. Retail Sales: +.4% expected vs. +.2% prior
5. Private sector credit: +.3% expected vs. +.2prior
6. The RBA will meet next week and thus the market is looking for guidance ahead of the policy meeting. The last round of economic data from Australia was sub-par. If September’s releases are equally if not more disappointing, the market will further push out the outlook for rates. Currently the OIS curve is inverted, suggesting that market is not looking for rate hikes within the next 12 months. Could be an invitation to sell rallies AUD/USD under yesterday’s high or below 8/25 low.

2.)    Emerging Markets:

1. Indian Q2 GDP: expected at 8.8% Y/Y vs. 8.6% Y/Y
2. Thai Trade numbers: exports: 47..1% prior; imports: 38.3% prior
3. Thai Manufacturing Production: 15.5% expected vs. 21.3% prior
4. Hong Kong Retail Sales: 14.1% expected vs. 15.3% prior
5. The emerging markets still remain a glimmer of hope in what seems to be a darkening economic picture. With China showing signs of slowing macro growth, the concern is that these economies will not be able to decouple on their own. If this data and the Chinese data begin to slow in tandem, fears that we are returning to the growth paradigm of 2008 will rise. Furthermore, emerging Asia did not experience the contraction the developed economies did in this period as central banks and governments were quick to respond. However, policy response may be slower this time around opening the door for more pain in emerging Asia. Keep in mind an official from the PBOC noted that policy will remain unchanged for China in the face of slower growth.

3.)    Japan:

1. The Japanese economic calendar is packed. Data points include: Nomura Manufacturing PMI, Retail Trade, Industrial Production, Vehicle Production, Housing Starts, Small Business Confidence, Construction Orders. MFGR will be closely watching the PMI figure. It has set back the last two months now to 52.8 from 54.7. The reaction could be mixed.  It seems as though the market is retreating to lower beta currencies as the “contagion trade” gathers steam. It will be interesting to see how the trade reacts to weaker Japanese data. A rally in the yen argues that the trade is sensitive to fundamental deterioration. Yen strength in the wake of disappointing figures will underscore the risk theme evident in yesterday’s FX price action. The yen trade is also quite sensitive to yields. As MFGR believes this week’s US data will underperform, we are expecting strength in the US treasury market which will pressure US yields and USD/JPY.

4.)    Europe:

1. Greek retail sales: -4.5% expected vs. -1.2% prior
2. Italian Retail Sales
3. EuroZone Unemployment Numbers: (EuroZone, Italy and Belgium)
4. German Unemployment Change:  -20K expected vs. -20K prior
5. Anglo Irish Bank releases H1 results
6. ECB 7-day lending facility
7. Today could be an excellent day for EUR bears. We are staring down the barrel at a fresh round of data and this could be start of the era of momentum deceleration in Europe. The market is already tense and uneasy. Data confirming fears of contagion and  economic weakness due to austerity measures will accelerate EUR selling and likely cause a general flight to safer assets. Watch overnight equity markets to set up for US currency trade. MFGR  believes EUR/USD will trade with a downside bias.

5.)    UK:

1. Consumer Credit: 0B expected vs. -.1B prior
2. Net lending on Dwellings: .7B expected vs. .7B
3. Mortgage Approvals: 46.5K vs. 47.6K
4. The UK housing market has shown signs that it is possibly moving into a double dip. The market will keep a keen focus on this data to see if the deterioration continues; such a conclusion will keep  the sterling under pressure.

By: Jessica Hoversen

MF Global Research