Market Drivers August 18, 2016
AU employment beats on headline
UK Retail Sales much stronger
Nikkei -1.55% Dax 0.46%
Europe and Asia:
AUD Employment 26.2K vs. 9.9K
GBP UK Retail Sales 1.4% vs. 0.0%
EUR EZ CPI -0.6% vs. -0.4%
USD Weekly Jobless 08:30
USD Philly Fed 08:30
USD LEI 10:00
Both Aussie and cable were well bid in Asian and early European trade today, boosted higher by much better than expected data.
In Australia the monthly employment statistics came in much better than forecast rising to 26.2K versus 9.9K eyed. Unemployment rate declined to 5.7% from 5.8% forecast and participation rate remained steady at 64.9%.
The massive jump in the headline number masked some underlying weakness as all of the gains came from part time jobs which rose 71.5K while full time jobs actually declined by -45.4K. This was the largest monthly decline in full time jobs in more than three years. Still, with unemployment rate steady the RBA is likely to remain stationary for the next few months and that prompted a push higher in AUD/USD which cleared the 7700 figure but then stalled and saw some profit taking.
With Aussie now approaching near term swing highs the pair is slightly overextended and unlikely to see much more upside despite the relatively benign economic environment unless the dollar weakens much further. To that end the FOMC minutes provided little help to greenback bulls as the tone of the meeting was far less hawkish than the market was led to believe. Still we have several Fed speakers on the docket today and they continue to make the case for tightening sooner rather than later.
Meanwhile in UK the Retail Sales data was much better than expected as it rose 1.4% versus 0.0% eyed. The release is notoriously volatile and this month’s results were driven by good weather and strong tourist spending so it may be incorrect to read too much into it. Still post Brexit UK data has been remarkably resilient as sentiment appears to be improving and that could provide scope for further cable rally over the next several days. Of course part of the reason for the improvement in UK data is due to the fact that PM May appears to have zero intention to actually enact the Brexit vote and that is providing a sigh of relief to the UK business community. For now cable has made a strong recovery above the 1.3100 level and could climb towards 1.3300 over the short term horizon.
In US today the calendar is muted with only Philly Fed and weekly jobless on the docket, but speeches from Dudley and Williams could keep things interesting and help drive USD/JPY back above the 100.50 level if both Fes speakers continue to reiterate the theme that tightening is coming sooner rather than later.