Market Drivers August 19, 2016

AU tumbles nearly a cent
UK PSNB a bit better
Nikkei 0.36% Dax -0.80%
Oil $48/bbl
Gold $1352/oz.

Europe and Asia:
GBP UK PSNB -1.5B vs. -2.2B

North America:
CAD CPI 8:30
CAD Retail Sales 8:30

It been a rambling lackluster night of trade in the currency market with the dollar showing a mildly bid tone against all the majors in very quiet end of week trade. The only notable mover was the Aussie which dropped nearly a full cent off session highs by morning European dealing.

The dollar got a bit of a boost from San Francisco Fed Governor Williams who noted in a speech that rates should rise sooner rather than later given the improved growth in wages. Mr. Williams is one of many Fed speakers who has turned decidedly more hawkish over the past few weeks, but so far the FX markets remain unimpressed with few players factoring a hike in December, much less September.

Still Fed officials appear to be serious about starting to normalize monetary policy, and some traders are looking for clues at next week’s Jackson Hole summit that could provide further guidance on Fed’s near term posture. USD/JPY meanwhile continues to consolidate around the 100.00 figure, but any attempts at a rally have been capped at 100.50 for the past 48 hours.

In Asia, the Aussie was the biggest mover of the day dropping to test support at the .7600 level after the Australian Treasurer Morrison formally rejected Chinese bid for Ausgrid on security grounds. The pair has not been able to hold yesterday’s highs after the better than expected AU labor data number and today’s price action suggests that further profit taking may be due with shorts possibly eyeing the 7500 support level over the next few days.

In North America today the US calendar is barren with only CAD CPI and Retail Sales on the docket. The loonie has seen a boost from rising oil prices this week, but if crude finds a cap at the $50/bbl level attention will turn back to soggy Canadian fundamentals. Both CPI and Retails sales are expected to be weaker this month and if they miss their mark the loonie could see some profit taking into the weekend with the pair rising back towards the 1.2900 figure.

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