Market Drivers July 16, 2019
UK Labor data
US Retail Sales on tap
Nikkei -0.69% Dax 0.08%
UST 10Y 2.09%
Oil $59/bbl
Gold $1413/oz.

Europe and Asia:
GBP UK Labor

North America:
USD Retail Sales 8:30

The dollar was firmer in Asian and European trade today with cable particularly weak as worries about a no-deal Brexit heightened the market anxiety and sent the pair below the 1.12500 level once again while pushing EURGBP to fresh 6 month highs.

UK Labor data came in mixed today with wages showing an upside surprise at 3.6% versus 3.5% eyed, while Claimant count rose to 38K versus 18.9K forecast. The solid beat on wages and relatively steady job picture continues to suggest that the UK economy remains resilient despite the political turmoil. But the focus of the market is now squarely on politics and with Tories trying to outdo one another as to who will execute the “hardest” Brexit fear of a no deal have spiked materially.

Deutsche Bank now puts the odds of no deal at 50% which is a significant risk and many other banks project that if Britain spins out of EU without any trade agreements cable could quickly sink to 1.1500.

For now the 1.2400 figure remains the zone of support and today’s data should provide a sigh of relief that the UK economy is not tipping over just yet, but as we approach the October deadline markets will get more nervous if no further progress is made.

Elsewhere, the focus in North America will turn to US Retail Sales with markets looking for a pullback to 0.1% from 0.5% the month prior. USDJPY has been slightly firmer in overnight trade climbing above the 108.00 figure, but weaker data could send it lower once again especially if consumer demand turns negative spurring speculation that the Fed will need to ease more than once before the end of the year. For now, the pair remains in a state of quiet equilibrium but until it can close above 108.50 level the upward trend in USDJPY remains in doubt.