Canadian dollar remains the weakest major currency for the week as oil's selloff continued. WTI crude oil dipped to as low as 39.26 overnight and stays below 40 in Asian session. Meanwhile, other commodity currencies are soft but weakness is limited, except versus Yen. Sterling, on the other hand, is steady in range as markets await BoE rate cut later in the week. In other markets, gold extended rally on dollar's weakness and is pressing recent high at 1377.5. One development to note is the selloff in US equities that confirmed short term topping. DJIA closed down -90.74 pts, or -0.49%, at 18313.77, comparing to record high at 18622.01. Asia follows with Nikkei trading down -165 pts, or -1% at the time of writing.
Yen remains first as markets are dissatisfied with the stimulus measures, both fiscal and monetary. Prime minister Shinzo Abe announced a JPY 28T package with only JPY 4.6T in direct spending for the current fiscal year. IMF mission chief for Japan Luc Everaert said that the fund supported BoJ's recent easing and "particularly the increase in the dollar lending operation as it will help avoid financial stability risks." And he noted that Abe's stimulus package "will slightly improve the outlook for the Japanese economy."
Markets are awaiting BoE's rate cut, and possibly expansion in asset purchase program. The National Institute for Economic and Social Research said in a report that growth could slow to 1.7% in 2016 and 1.0% in 2017. Such slowdown could eventually prompt BoE to cut interest rate to 0.1% this year. NIESR economists noted that the downturn is "here and now" and "there are serious risks to the near-term". If there would be a "fiscal policy response" the slowdown could be less severe. However, BoE would need to push to the limits of monetary policies in the absence of fiscal response.
In US, Atlanta Fed president Dennis Lockhart said that he won't rule out a September rate hike and Fed should see how the data come in . He noted that "the situation is maybe a little bit ambiguous, but I can imagine conditions in which we could have a rate hike." Dallas Fed president Robert Kaplan urged to hike in a "gradual and patient manner" and "based on a realistic assessment of progress toward achieving the Federal Reserve's dual-mandate objectives regarding full employment and price stability."
On the data front, UK BRC shop prices dropped -1.6% yoy in July. China Caixin PMI services dropped to 51.7 in July. Services PMI will be the main focus in European session while Eurozone will also release retail sales. US will release ADP employment and ISM services.