Market Drivers August 15, 2017
Easing of NK Tensions sends USDJPY through 110.00
UK CPI data misses
Nikkei 1.11% Dax 0.18%
Europe and Asia:
EUR GE GDP 0.8% vs. 1.9%
GBP UK CPI 2.4% vs. 2.5%
USD Retail Sales 8:30
USD Empire Manufcaturing 8:30
A confluence of factors helped the dollar to rebound in Asian and early European trade today as markets braced themselves for the US Retail Sales report due later at 12:30 GMT.
In early Asia, the dollar got a boost from a Wall Street Journal report that North Korea backed away from its threat to launch missiles towards Guam. The easing of tensions propelled USDJPY through the 110.00 figure and the pair continued to rise until it met resistance at the 110.50 level.
Later on weak German GDP data which printed at 0.6% versus 0.7% as well as cooler than expected UK CPI numbers which came in at 2.4% versus 2.5% all combined to help push the buck higher in active European trade. The EURUSD recovered most of its losses, but cable remained within striking distance of the 1,.2900 figure as the latest inflation figures dampened any expectation of an imminent rate hike from the BOE.
Cable continues to be the relative weakness trade amongst the majors with EURGBP taking out the .9100 figure in today’s trade. Some analysts are forecasting that with Brexit negotiations essentially at standstill and UK economic position increasingly vulnerable, EURGBP parity may be in the offing by 2018.
As to the dollar, all eyes will turn to today’s Retail Sales report to see if the results will break the streak of disappointments in US consumption. As we noted yesterday, “despite relatively buoyant US job growth, consumption continues to be anaemic. Retail Sales have missed their mark five out of the last six months and only grew at 2.8% nominal annual rate in June. The persistent refusal of the consumer to ramp up spending is clearly worrying the bond market which sees little prospect of growth ahead.”
The focus today will be on core Retail Sales data which is projected to rise 0.3% from -0.2% the month prior. Any rebound of such magnitude will be seen as a relief and could carry USDJPY through the 111.00 level, but if the data misses the mark again – or worse prints negative the pair could once again tumble towards 109.00 as the day proceeds.