Today's U.S. reports Today's U.S. reports revealed upside surprises for the August retail sales and July business inventory data that lifted Q2 and Q3 GDP growth prospects, and that put a positive spin on the U.S. economic data as analysts approach next week's FOMC meeting. Analysts now assume a 3.0% (was 2.8%) GDP growth clip in Q3 that follows a boost in Q2 GDP growth to 4.4% from 4.2%. Analysts also saw an expectations-led bounce in Michigan sentiment to an 84.6 one-year high that defied headwinds from the deteriorating geopolitical backdrop. The trade price report for August revealed big headline price declines led by petroleum and food, alongside a flat core price path.
Euro$ interest rate options: a boost to bearish put trade Euro$ interest rate options: a boost to bearish put trade has lifted the aforementioned purchase of Green November 73/76 put spreads vs sale of Short November 85/87 put spreads from the 30k originally reported to some 80k now over the course of the session. Euro$ are still as much as 9-ticks lower further out the curve.
Business Inventories data reported July Business Inventories up 0.4% vs. consensus of 0.4% for the month
U.S. preliminary consumer sentiment rose to 84.6 for September U.S. preliminary consumer sentiment rose to 84.6 for September, after edging up to 82.5 in the final August print. The index has bounced from the 2014 low of 80.0 in March and is the highest since July 2007. The strength was in the outlook index which climbed to 75.6 from 71.3. The current conditions index fell to 98.5 from 99.8. Inflation expectations dipped. The 1-year ahead outlook slowed to 3.0% from 3.2% previously. And the 5-year ahead measure slid to 2.8% from 2.9%.
U.S. Michigan Consumer Sentiment Preview U.S. Michigan Consumer Sentiment Preview: Preliminary Michigan Sentiment is forecast to slip to 82.0 (median 80.0) in September from 82.5 in August. The IBD/TIPP poll for the month rose to 45.2 from 44.5 and the RBC/CASH Index was up 52.4 from 51.5. Despite these improvements in the secondary measures of confidence analysts continue to expect some give back of August strength in Michigan and Consumer Confidence.
Treasury Action: the vicious cycle of yield and dollar gains resumed Treasury Action: the vicious cycle of yield and dollar gains resumed with the T-note yield trespassing above 2.60% for the first time in over a month, now eyeing 2.614% July 31 highs. This has meanwhile given the dollar index another leg up to session highs of 84.41 as the euro sags toward $1.29 and the yen to 107.39 vs the dollar. The move may pause to reflect ahead of the next round of sentiment and inventories before resuming. Stocks opened weaker despite the bullish signals from USD-JPY near highs, while commodities and commodity currencies continue to sink. Note, analysts have raised our Q2 GDP estimate to 4.4% from 4.2% based on the retail sales data, while leaving Q3 GDP at 2.8%; Goldman just raised their Q3 GDP estimate to 3.3% from 3.1%.