Dollar gains on upbeat data, No-Deal weighs on Sterling again
The Pound fell from the open into the release of UK labour market data. UK unemployment remained at 3.8% in the three months to May, in line with forecasts. The jobless claimant count for June was larger than forecast and employment increased less than expected at 28,000. Headline annual wages growth accelerated to 3.4% from 3.2% and wages excluding bonuses strengthened to 3.6%, to an 11-year high. Sterling briefly regained some ground but negative sentiment dominated and Sterling dropped again.
Brexit concerns resurfaced with both Conservative Party leadership candidates stating that the Northern Ireland backstop had to be removed. Sterling suffered renewed pressure after reports that Boris could schedule a November Queen’s speech to be preceded by a parliamentary recess in late October; closing Parliament for the Brexit deadline. The Pound slumped to just below 1.2400 against the Dollar (last seen May 2017) and the Euro reached 6-month highs near 1.1060. Sterling opens modestly higher ahead of UK inflation data and early General Election speculation is weighing on sentiment.
The Dollar stood firm on Wednesday after upbeat U.S. data further tempered expectations of aggressive policy easing by the Federal Reserve later this month. June US retail sales increased 0.4% compared with consensus forecasts of 0.1% while underlying sales increased 0.7% following a 0.5% gain the previous month.
With the overall data being strong a shift in interest rate expectations of a 0.50% cut has declined to around 26%. There was also increased confidence in the US outlook which underpinned the US currency. Industrial data was mixed with a stronger than expected increase in manufacturing output offsetting an unchanged reading for overall output while the July NAHB housing index strengthened slightly to 65 from 64 previously.
The German ZEW investor confidence index declined to a 9-month low of -24.5 from -21.1 previously and below consensus forecasts. The current conditions index also declined while the Euro-zone index was little changed. The Euro lost ground ahead of the New York open with a fresh slide in German bond yields continuing to undermine currency sentiment.
Ursela von der Leyen was confirmed by the European Parliament as the next head of the EU Commission, but the narrow margin of victory maintained fears over divisions. As for this morning, the Euro seems to have shot straight down to 1.1200 during the first couple of hours of the trading session but seems to slowly be making a recovery.
Data to watch:
00:30 AUD Westpac Leading Index (MoM) (Jun)
07:30 EUR ECB’s Cœuré speech
08:30 GBP Retail Price Index (MoM) (Jun)
08:30 GBP Retail Price Index (YoY) (Jun)
08:30 GBP PPI Core Output (YoY) n.s.a (Jun)
08:30 GBP Producer Price Index – Input (YoY) n.s.a (Jun)
08:30 GBP Consumer Price Index (YoY) (Jun)
08:30 GBP Core Consumer Price Index (YoY) (Jun)
08:30 GBP Consumer Price Index (MoM) (Jun)
09:00 EUR Consumer Price Index (MoM) (Jun)
09:00 EUR Consumer Price Index – Core (MoM) (Jun)
09:00 EUR Consumer Price Index – Core (YoY) (Jun)
09:00 EUR Consumer Price Index (YoY) (Jun)
10:00 EUR German Buba President Weidmann speech
12:30 USD Housing Starts (MoM) (Jun)
12:30 USD Building Permits (MoM) (Jun)
12:30 CAD BoC Consumer Price Index Core (YoY) (Jun)
12:30 CAD BoC Consumer Price Index Core (MoM) (Jun)
12:30 CAD Consumer Price Index (YoY) (Jun)
12:30 CAD Consumer Price Index – Core (MoM) (Jun)
12:30 CAD Consumer Price Index (MoM) (Jun)
18:00 USD Fed’s Beige Book
23:50 JPY Imports (YoY) (Jun)
23:50 JPY Exports (YoY) (Jun)
23:50 JPY Merchandise Trade Balance Total (Jun)
23:50 JPY Adjusted Merchandise Trade Balance (Jun)