Market Drivers for August 15, 2013
UK Retail Sales beat taking cable towards 1.5600
Japanese officials deny tax cut sending USD/JPY on a yo-yo trip
Nikkei – 2.12% Europe -0.23%
Europe and Asia:
AUD Consumer Inflation Expectations 2.3% vs. 2.6%
JPY Japan Buying Foreign Stocks
JPY Japan Buying Foreign Bonds
NZD Business NZ Performance of Manufacturing Index 59.5 vs. 55.2
GBP Retail Sales 1.1% vs. 0.7%
USD CPI 8:30
USD Industrial Production 9:15
USD NAHB Housing Market Index 10:00
USD Philly Fed 10:00
Another positive report out of UK helped push cable towards the 1.5600 level while USD/JPY was jerked around like a yo-yo after Japanese officials denied rumors of any corporate tax cut in the near future. Given the fact that we are in the middle of the summer holiday season, it was nevertheless a relatively lively dealing session in Asian and early morning European trade.
In UK Retail Sales handily beat expectations printing at 1.1% versus 0.7% eyed as the recovery is starting to have a positive impact on consumer spending. Sales were up an impressive 3% on a year over year basis boosted by hot weather. in July. Supermarkets saw a monthly rise in sales of 2.5% and reported strong sales in barbeque food, outdoor items, clothing and alcohol.
Cable responded positively to the news spiking to a high of 1.5594 before easing slightly on profit taking. The pair is now within striking distance of the the key 1.5600 level which has been tough resistance over the past several days. However given the string of upside economic surprises for the past two weeks, investors are much more confident in the UK recovery story and may now push the pair through the 1.5600 barrier in North American trade.
In Asia meanwhile USD/JPY seesawed wildly first rising on speculation of a possible corporate tax cut then falling sharply after official denials from chief cabinet secretary Suga and Japan’s finance minister Aso. The rejection of the tax cut idea could weigh on USD/JPY as Japanese efforts at stimulating the economy run up against the reality of facing a massive budget deficit.
So far the USD/JPY rebound has stalled ahead of the 98.50 level and the pair has not been helped by the tame US inflation data which takes some of the pressure off the Fed to taper early. Today’s CPI numbers which are expected to print at 0.2% versus 0.2% the month prior could reinforce that notion if they print cooler than forecast.
In addition to the CPI readings the market will get a see a slew of Industrial data including Empire, Philly and IP numbers. If the data shows any slowdown in activity USD/JPY could drift lower once again. On the other hand if US data shows a pick up from the stall in July then markets may take another run at the 98.50 level in USD/JPY.