CHINA: Reflationary Process Expected to Remain Slow

• Gold has rallied to a fresh all-time high on Monday amid broad dollar weakness ahead of Wednesday's FOMC meeting, when a 25bp rate cut is widely expected. Bullion may also be benefitting from continued Fed independence concerns after President Trump called again for rates to be cut.
• Spot gold has risen by a further 1.0% to $3,681/oz, taking total gains this month to almost 6%.
• Gold remains in a clear bull cycle, with the break higher confirming a resumption of the primary uptrend. Above here, attention turns to round number resistance at the $3,700 handle, followed by $3,716.5, a Fibonacci projection.
• Similarly, silver has also rallied by 0.9% to $42.6/oz.
• Trend signals in silver remain bullish, with today’s move piercing resistance at $42.606, a Fibonacci projection. Above here, next resistance is seen at $42.974, the 2.382 projection of the Jul 31 - Aug 14 - 20 price swing, followed by $43.000 round number resistance.
• Meanwhile, WTI crude is also trading higher, with the market weighing the impacts of further Ukrainian drone attacks on Russian energy infrastructure.
• WTI Oct 25 is up by 0.9% at $63.3/bbl.
• Despite the move, a bear cycle in WTI futures remains intact and short-term gains are considered corrective.
• Initial resistance to watch is $66.03, the Sep 2 high. Initial support is at $61.29, the Aug 13 low and the bear trigger.

• Despite a relatively calm start to the week from an event risk perspective, the US dollar is trading on the back foot Monday. Strong performance for the major equity benchmarks on US/China optimism has been weighing, while the more activist approach to Fed personnel management from the White House may be providing an additional greenback headwind.
• The USD index sits 0.25% lower on the session in sympathy, with broad based associated strength for the rest of the G10. GBP moderately outperforms, while AUD has also extended its recent momentum.
• Bullish conditions for GBPUSD have been bolstered this morning, following the break of the bull trigger located at 1.3595 (Aug 14 high) which places the pair at two-month highs and suggests the corrective cycle between Aug 14 - Sep 3 is over. Immediate resistance is found at 1.3636, the 76.4% retracement of the Jul 1 - Aug 1 downleg, before 1.3681, the Jul 4 high. UK labour market data kicks off Tuesday’s calendar, before UK CI and the BOE decision later this week.
• For AUDUSD, today’s 0.3% advance prompted fresh cycle highs for the pair at 0.6672. Last week’s gains plus the breach of the bull trigger at 0.6625 confirmed a resumption of the technical uptrend, and the pair has narrowed the gap substantially to the US election related highs at 0.6688. RBA Assistant Governor and chief economist Hunter will speak in a fireside chat Tuesday.
• SEK also outperforms the G10 basket, supported by the aforementioned drivers. However, there may also be some spillover from Riksbank Governor Thedeen's recent interview with Dagens Industri, which cements next week's central bank decision as a very close call between a cut and a hold.
• Aside from UK data, German ZEW will cross during the European morning on Tuesday. Focus then shifts to US retail sales and Canadian CPI as notable data prints before the plethora of central bank decisions later in the week.

Eurozone posted wage growth eased back to 2.55% Y/Y in August, after 2.67% in July and 2.55% in June (with small upward revisions seen to prior months) according to the latest Indeed wage tracker. That meant 3m Y/Y growth was broadly steady at 2.59% Y/Y (vs 2.56% prior). 

• As we have noted in recent months, the Indeed wage tracker’s usefulness as an indicator has declined since the ECB started publishing its own forward-looking negotiated wage tracker. Additionally, there remain some questions marks around the robustness of the data, particularly with Italy registering a supposed fourth consecutive month of 0% posted wage growth. The Eurozone-wide sample also remains dominated by observations in France.
• The ECB’s next wage tracker update will be released on Wednesday. At the September press conference, President Lagarde noted that “Forward-looking indicators, including the ECB’s wage tracker and surveys on wage expectations, suggest that wage growth will moderate further”.