Article Highlights

  • U.K. retail sales m/m: 1.3% vs. 0.6% expected, -0.5% previous
  • U.K. core retail sales m/m: 1.5% vs. 0.7% expected, -0.7% previous
  • U.K. retail sales y/y: 4.3% vs. 2.5% expected, 3.0% previous
  • U.K. core retail sales y/y: 4.2% vs. 2.0% expected, 2.6% previous
  • Two voting FOMC members are going to speak later
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The fallout from yesterday’s FOMC minutes can still be felt in today’s morning London session, causing another round of intense risk aversion which favored the safe-havens while pummeling the higher-yielders. The pound was marching to the beat of its own drummer, though.

Major Events/Reports:

Great U.K. retail sales report – The volume of retail sales in the U.K. expanded by 1.3% month-on-month in April, which is great because only a 0.6% increase was expected. Moreover, the previous reading was significantly upgraded from a 1.3% slump to more moderate 0.5% decline.

The core reading, which strips the volatile “automotive fuel” component, was also impressive since it printed a 1.5% month-on-month increase (0.7% expected, -0.7% previous). The only sore spot was that average store prices fell by 2.8% year-on-year, which is gonna be bad for CPI.

ECB meeting minutes – We’ve finally got out hands on the minutes for the ECB’s April 20-21 meeting, and the ECB was basically congratulating itself because the additional easing measures introduced by the ECB during the March 10 decision was finally having a positive impact.

However, the ECB was also concerned that growth in the euro zone was still being driven by domestic demand and that inflation remained subdued and will likely remain subdued in the coming months, but noted that economic developments in the euro zone were positive overall.

Given all that, the ECB thought that it was appropriate to maintain their current policy. Basically, the ECB pretty much reiterated everything that was said in the April 21 ECB press conference, which is probably why euro pairs didn’t react much.

The minutes did say, however, that the ECB defended itself from public criticism delivered by “a Member State,” as well as hinting that further easing moves were unlikely in the near future because the ECB is more focused on “the implementation of the additional measures that had been decided on 10 March 2016.”

Commodities carnageCommodities were down and bleeding out during the morning London session, thanks to the Greenback’s recent strength due to yesterday’s FOMC meeting minutes, which placed expectations of a June rate hike back into play.

Oh, for the newbies out there, globally-traded commodities are usually denominated in U.S. dollars, so a stronger dollar makes buying commodities relatively more expensive.

Anyhow, the base metal copper was down by 0.99% to $2.058 per pound while the precious metal gold was down by 1.53% to $1,254.85 per troy ounce. As for oil benchmarks, U.S. crude oil was down by 1.85% to $47.30 per barrel while Brent blend crude oil was down by 2.23% to $47.84 per barrel.

Risk aversion domination – We got another bout of risk aversion during today’s morning London session, with the pan-European FTSEurofirst 300 down by 0.75% to 1,315.82, the Euro Stoxx 50 down by 0.78% to 2,933.00, and the DAX down by 1.01% to 9,842.50 near the end of the session.

U.S. equity futures were also signalling that the risk-off sentiment will likely spill over into the U.S. session since the S&P 500 futures index was down by 0.21% to 2,037.25 while the Nasdaq futures index was down by 0.24% to 4,321.88.

Market analysts noted that mining companies were dragging European equity indices lower, so the gloomy risk sentiment during the session was likely due to the commodities carnage. These same analysts also noted that airline companies were a major drag, and they pointed to skittish investor sentiment because of the missing EgyptAir flight.

Major Currency Movers:

CAD – The Loonie got double-teamed and slammed hard by the prevailing risk-off sentiment and the broad-based commodities rout, so much so that it lost out to its fellow higher-yielding comdolls.

USD/CAD was up by 47 pips (+0.36%) to 1.3107, AUD/CAD was up by 13 pips (+0.14%) to 0.9429, NZD/CAD was up by 19 pips (+0.22%) to 0.8826

JPY – The risk-off environment sent forex traders screaming in pain and/or panic towards the safe-haven currencies (USD, JPY, CHF), with the yen emerging as the safe-haven of choice, at least during the morning London session.

USD/JPY was down by 24 pips (-0.22%) to 109.92, CHF/JPY was down by 63 pips (-0.57%) to 110.96, CAD/JPY was down by 51 pips (-0.61%) to 83.83

GBP – The pound surged higher across the board when the positive U.K. retail sales report was released and then had a more mixed performance after that because it pressed its advantage against the higher-yielders while slowly losing some of its gains against the safe-havens.

GBP/USD was up by 27 pips (+0.19%) to 1.4612, GBP/CAD was up by 103 pips (+0.54%) to 1.9153, GBP/AUD was up by 83 pips (+0.42%) to 2.0313

Watch Out For:

  • 12:30 pm GMT: Canadian wholesale sales (-0.5% expected, -2.2% previous)
  • 12:30 pm GMT: Philadelphia Fed survey (3.0 expected , -1.5 previous)
  • 12:30 pm GMT: U.S. initial jobless claims (275K expected, 294K previous)
  • 1:15 pm GMT: U.S. Fed Governor Stanley Fischer has a speech
  • 2:00 pm GMT: U.S. CB leading indicator (0.4% vs. 0.2% previous)
  • 2:30 pm GMT: New York Fed President William Dudley has a press conference
  • 5:00 pm GMT: MPC Member Gertjan Vlieghe will deliver a speech

See also:

Asian Session Forex Recap

U.S. Session Forex Recap

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