The Atlanta Fed GDP model for the 3Q now sees growth at 1.4% which is down from 2.6% on September 1.

Those are significant misses on estimates as ongoing COVID-19 restrictions is arguably a key factor weighing on the economy. But as the saying goes: when China sneezes, the world catches a cold.

And the trade numbers from today will add to concerns for the global economy and outlook in the months ahead.

It is still all about the dollar right now as we are seeing a further capitulation in the yen and a further decline in the yuan – both of which are fueling further gains in the greenback this week. The US currency is running hot and is higher across the board once more, threatening to break even higher against some of the major currencies this week.

Equities remain sluggish with US stocks falling once more yesterday. Of note, the Nasdaq posted its seventh straight day of losses – its longest streak since November 2016. Meanwhile, bond yields are still pressing higher with European governments looking to pile on more debt in order to deal with the energy crisis ahead of winter.

Looking ahead, trading sentiment will continue to revolve around the key points above but it’s all about watching if the dollar has legs for another run higher as it approaches some key levels on the charts.

0600 GMT – Germany July industrial production data
0600 GMT – UK August Halifax house prices
0900 GMT – Eurozone Q2 final GDP figures
1100 GMT – US MBA mortgage applications w.e. 2 September

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

• 09:00 New York time (1300GMT) Federal Reserve Bank of Richmond President Thomas Barkin participates in fireside chat before hybrid Federal Reserve/Massachusetts Institute of Technology Conference on Measuring Cyber Risk in the Financial Services Sector
• 10:00 New York time (1400GMT) Federal Reserve Bank of Cleveland President Loretta Mester speaks on the “U.S. Economy and Federal Reserve Policy” before a Market News International webcast
• 12:35 New York time (1635GMT) Federal Reserve Vice Chair Lael Brainard speaks on the economic outlook and monetary policy before the Clearing House/Bank Policy Institute Annual Conference
• 14:00 New York time (1800GMT) Federal Reserve Vice Chair for Supervision Michael Barr speaks on “Making the Financial System Safer and Fairer” before hybrid Brookings Institution event

And. also:

• 14:00 New York time (1800GMT) Federal Reserve issues the Beige Book of economic condition:

Beige Book is the commonly used name for the Summary of Commentary on Current Economic Conditions by Federal Reserve District

The 500+ point gap between the estimate and the actual is the largest ever recorded.

The PBOC has been setting the CNY stronger (i.e. lower USD/CNY) than the estimate for 11 days in succession. This is a ‘signal’ from the PBOC that they’d like to slow the rate of decline of the yuan. And, maybe they have, we’ll never know for sure what the counter-factual might have been. Still, the yuan is weak, the USD is rampantly strong.

Offshore yuan has slipped again today (ie higher USD/CNH). It can;t be too long before there is a “7” in front of this:

The Central Bank of Chile (Banco Central de Chile) has raised its overnight rate to 10.75% from 9.75% prior.

• The 100bp rate hike is above the +75 that was the consensus expected.

In its statement the Bank said the policy rate is now near the maximum that was outlined in the central scenario September quarterly report.

Chilean TPM rate (not updated with today’s decision yet):