Model dips after details of retail sales today
The Atlanta Fed GDPnow estimate for third-quarter growth has dipped to 3.6% from 3.7% after today’s retail trade report the residential investment component was a negative influence as was exports.
The high watermark for the models estimate came in at 6.2% back on August 17. The 3.6% level today is tied with other levels from September 13 and September 14.
EUR/USD down 40 pips on the day to 1.1775
The dollar isn’t overwhelmingly strong in European trading but there is an evident push lower in EUR/USD over the past few hours as the pair slides from 1.1810 to 1.1775 and is marked down by 40 pips on the day now.
There isn’t any major catalyst for the move but this ties to more of a push and pull as seen in recent days as sellers now keep near-term control of the pair.
Price action is keeping below both key hourly moving averages so the near-term bias favours sellers but there is support from the Monday low @ 1.1770.
But a daily break below that and the 50.0 retracement level @ 1.1786 sets the stage for an added drop perhaps towards 1.1700 next. Besides a couple of technical considerations as pointed out above, there isn’t much else for traders to work with.
The dollar continues to look more choppy overall but standing its ground in light of any short-term weakness as the Fed’s taper narrative continues to offer some tailwind for the currency going into next week’s FOMC meeting.
I mean we already saw that sort of conviction already after the US CPI report, in which the drag on the dollar was a rather brief one by all accounts.
How concerned should the market really be on China right now?
When the sleeping giant awakens, things don’t tend to end well. I reckon that may be the case with China right now as the market appears to be rather sanguine about all the risks involved amid the shift in direction by local authorities.
Evergrande is the name that stands out as the poster boy for all of those worries, as the company is being made an example of the broader crackdown that China is trying to push forward with across most, if not all, major industries right now.
Don’t get me wrong. China has the tools at its disposal to easily bail out Evergrande and prop up the economy. It just isn’t choosing to do so at this moment for one reason or another, be it debt worries or just plain power consolidation.
The government’s latest feud with Alibaba also shows how much they are trying to rein in control as the digital yuan rollout faces a big challenge amid more established payment networks such as Alipay and WeChat Pay.
As much as the PBOC maintains that a digital yuan isn’t a competitor to those apps, it is clear that when Chinese authorities get around to rolling something out that they are not just going to let it be overshadowed or have it play second fiddle if you will.
That may also be in part why China is cracking down more heavily across other sectors of the economy as well. But if I had to guess, I’d say that the slowing recovery in China (economic data has been terrible lately) gives local authorities a reason to just double down on regulatory measures so as to start fresh again when the economy gets back up.
In a way, one can say that it could be akin to a ‘healthy reset’.
Evergrande is the more immediate risk factor considering that it is the country’s most indebted company and we’re already seeing some reverberations:
Something to watch for before then is coming up on Monday. The 20th will bring the People’s Bank of China setting its one-year and five-year loan prime rates.
These have remained unchanged for 16 months.
- one-year loan prime rate 3.85%
- five year rate 4.65%
I’ll have more on this on approach.
NK says its railway-borne missile system is an efficient counter-strike weapon.
Some pics are doing the rounds:
Ray Dalio is the founder of the world’s largest hedge fund, Bridgewater Associates; he said he still thinks that bitcoin makes a good alternative to cash
Dalio was speaking in a CNBC interview:
- said regulators will kill BTC if its successful, “I think at the end of the day if it’s really successful, they will kill it and they will try to kill it. And I think they will kill it because they have ways of killing it”
Dalio likes BTC:
- “I think it’s worth considering all the alternatives to cash and all the alternatives to the other financial assets. Bitcoin is a possibility. I have a certain amount of money in bitcoin”