Updated September 2, 2010

The Nikkei (+1.5%), the Hang Seng (+1.2%) and the Shanghai Comp (+1.3%) all posted solid gains last night. The FTSE (-0.1%), the CAC (+0.1%) and the DAX (-0.1%) are taking a much more cautious stance. Oil, at $73.22/bbl, is a touch lower. Gold, at $1247.88/oz, is a touch higher.

GBP lost the most ground amongst the majors overnight after an Aug decline in UK House Price data and a softer than exp UK Const PMI were posted. The AUD also gave back some of y’days gains when their July trade surplus was not as robust as exp. EUR/USD (1.2775-1.2838 last night) edged up last night and showed no reaction to the ECB announcement, this morning, that there was no change to their benchmark int rate. ECB Pres Trichet’s press conf will be watched as updated econ forecasts are exp and clues may be inferred on upcoming policy developments. The NZD, CHF (after Switz posted a better than exp Q2 GDP report), and the JPY (83.98-84.55 ag the USD last night) all posted moderate gains. There are decent option strikes at 1.2800 in EUR, 1.5400 in GBP and 84.00 in JPY today. The US reports Q2 Prod/Unit Lab Costs (exp -1.9%/+1.2%), July Fact Ord’s (exp +0.2%), July Pending Home Sales (exp -1.0% m/m), Aug Chain Store Sales (exp +2.7% y/y) and the weekly jobless claims and nat gas inv reports today. The imminence of tom’s US empl report may keep mkt reaction subdued as today’s reports are perceived as less consequential.

USD/CAD (1.0487-1.0547 last night) traded quietly last night in the bottom half of y’days range which exhibited surprising CAD strength. Perhaps a lack of solid interest on the order board, still evident, should have been a warning of the potential for a big move in the CAD. Interest in these well travelled levels remains very light until we get towards to either the low 1.04’s or the top half of the 1.06’s. There are no Cdn data releases today.

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