North American FX Open - Dollar better bid heading into busy US data slate

The DOLLAR is slightly better bid as we head into a busy slate of US releases. Updates on retail sales and jobless claims should be the highlights of a schedule that also includes the Empire Manufacturing and Philly Fed surveys, import/export prices, industrial production/CapU, business inventories and the NAHB Housing Market Index.

It has been an overnight session full of upbeat releases and an unchanged verdict from the Norges Bank.

The first look at Japanese growth in Q2 came in at 3.1% q/q annualized, better than the 2.3% forecast, but the Q1 reading was revised down to minus 2.3% from the previous minus 1.8% print.

The Australian employment report for July revealed a 58.2k rise in jobs, which was much larger than the 20k forecast. The June figure was also revised up to 52.3k from 50.2K. The details were also impressive, with full time roles rising by 60.5k and the participation rate moving up to 67.1%, its highest level in over 30 years. The only disappointment was a rise in the unemployment rate to 4.2%, its highest level since January 2022.

The data helped Aud/Usd rebound back above the 0.6600 level to 0.6631 in European trade, following a nervous pre-date sell-off down to 0.6571.

UK Q2 GDP matched expectations, coming in at a solid 0.6% q/q, but there were upside surprises from June manufacturing and construction numbers. The good news was that GDP per capita in the UK has now risen for two quarters running, but it is still 0.9% below its pre-pandemic peak.

The Norges Bank kept interest rates unchanged at 4.5% and added that they expect to keep it at that rate for some time. The central bank admitted that higher rates have led to a cooling in the economy and that growth is now low, but states that while inflation has fallen back considerably from its peak, the rise in business costs will slow disinflation. Wolden-Bache and Co added that they are particularly concerned with Krone developments.

In Sweden, ahead of next week's Riksbank decision, the latest Prospera report on Swedish inflation expectations showed a meaningful slow down in price rises. The one year outlook for CPIF fell to 1.8% in August vs 2% in July and it was a similar outcome for the two year outlook. The longest time-frame, the five year outlook, slipped to 2% from 2.1%.

Provisional Swiss GDP in Q2 came in at a better than expected level of 0.5%, which was faster than the 0.3% growth rate in Q1. Meanwhile Swiss producer and import prices were flat again in July, which translated into a 1.7% fall y/y.

The better outcome for growth in Q2 was driven mostly by stronger growth in manufacturing. The data is consistent with an economy that is operating broadly at potential, with no signs of overheating, which should not prevent the SNB from cutting rates two more times this year.

As well as the busy US data slate, we should also hear from the Fed's Musalem and Harker. Musalem is a voter this year, but Harker is not.

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