Germany’s ZEW figures due out today

MORNING OVERVIEW

The UK’s unemployment rate for July came in lower than expected, defying expectations by economists of a loosening labour market. In Europe, we would focus today on Germany’s ZEW figures which are due out during the European session. Over in Asia, China’s unemployment rate for August came in higher than expected at 5.3% versus 5.2%, implying a loosening labour market, which could spell trouble for the CNH. From a geopolitical standpoint, the Houthi rebels have continued their strikes against Saudi Arabia, which could aid oil prices. Lastly, the US 10YR Treasury Yields have risen to their highest levels in almost two decades.

MARKET SNAPSHOT

MARKET	CURRENT	CHANGE	COMMENT
S&P 500	7597	-0.30%	Fed decision this week
DXY	99.65	+0.26%	Fed decision this week
EUR/USD	1.1607	-0.14%	Fed decision this week
Gold	4289	-0.20%	Fed decision this week
Brent Crude	103.44	+2.02%	Oil supply constraints increase

KEY MARKET THEMES

01 — Germany ZEW figures due out

Germany’s ZEW economic sentiment figures for the month of September are set to be released during today’s European trading session. According to economists the economic sentiment figure is set to showcase an improvement from 34.2 to 40 with the current economic conditions also set to improve from -61.1 to -52.1. The financial release could provide support for the EUR as it may showcase optimism in one of Europe’s largest economies. On the other hand, a figure lower than what has been pencilled in by economists could instead weigh on the EUR.

Market implication (EUR): Bullish

02 — Brent above $100 per barrel as Houthi strikes intensify

Oil prices have remained above $100 per barrel as Houthi strikes against Saudi targets continue. In particular, Reuters has reported that the Iranian-backed group was digging into positions on the western coast of Yemen along the Red Sea, with the group stating that they fired dozens of missiles and drones at a military base in Khamis Mushait in Saudi Arabia on Monday. The continued escalation in the region continues to further restrict oil production capabilities, which may further aid oil prices in the long run.

Market implication (OIL): Bullish

03 — UK Unemployment rate comes in lower than expected.

The UK’s unemployment rate for the month of July came in lower than expected with the rate coming in at 4.9% versus the expected rate of 5%. Thus the rate failed to validate expectations by economists of a loosening labour market in the UK economy. In turn, the better-than-expected figure could provide some support for the sterling. Although considering the release refers to July, the impact on the GBP may be muted.

Market implication (GBP) : NEUTRAL

WHAT MATTERS TODAY

Germany’s ZEW economist sentiment figure for September

Time (GMT+2): 12:00

Expected: 40.0
Previous: 34.2

Potential market reaction:
Could provide support for the EUR

ECB Schnabel’s speech

Time (GMT+2): 20:00

Expected: N/A
Previous: N/A

Potential market reaction:

Any hawkish commentary from the policymaker could provide support for the EUR and vice versa.

WHAT MATTERS TOMORROW

Japan’s Trade Balance in Yen for August

Time (GMT+2): 02:50

Expected: -1,052.6B
Previous: -634.5B

Potential market reaction:

Could weaken the JPY

ASSET FOCUS

[GOLD / COMMODITIES]

Gold appears to be moving in a downwards fashion with the commodity having cleared our support turned to resistance at the 4320 (R1) level. Moreover the RSI figure below our chart is currently registering a figure close to 40  implying bearish market tendencies.

KEY LEVELS

• Resistance (R1): 4320
• Resistance (R2): 4520
• Support (S1): 4180
• Support (S2): 4020

Technical View: BEARISH

CROSS-ASSET VIEW

ASSET CLASS	BIAS	KEY DRIVER
Equities	Bearish	FED
USD	Bullish	FED
Gold	Bearish	US 10YR Yields
Oil	Bullish	Houthi rebels

RISKS TO THE VIEW

Easing of US10YR Treasury Yields

Currently our views are being aided by the rising US 10YR Treasury Yields which are close to levels last seen in 2007. Should the narrative change we say rapid changes in on our cross-asset views.

TRADING SPHERE VIEW

Bullish for oil prices

Our base case:
Houthi rebels continue on their military campaign against Saudi Arabia infrastructure which could further dampen hopes of a stable oil supply chain. Hence, further disruptions and attacks may aid oil prices.

What would change our view:
A genuine attempt to de-escalate the situation between the US and Iran

TODAY’S WATCHLIST

01 Germany’s ZEW figures

02 Speech by ECB Schnabel

03 API weekly crude oil inventories figure