- Euro Zone current account: €28.2B vs. €27.3B expected, €31.8B previous
- U.K. retail sales m/m: 1.4% vs. 0.1% expected, -0.9% previous
- U.K. core retail sales m/m: 1.5% vs. 0.3% expected, -0.9% previous
- U.K. retail sales y/y: 5.9% vs. 4.2% expected, 4.3% previous
- U.K. core retail sales y/y: 5.4% vs. 3.9% expected, 3.9% previous
- Euro Zone HICP y/y: unchanged at +0.2% as expected
- Euro Zone core HICP y/y: unchanged at +0.9% as expected
The pound skyrocketed on positive retail sales data while the yen got weighed down by risk appetite in today’s morning London session. Meanwhile, the Aussie and the Swissy had some rather wonky price action.
Upbeat U.K. retail sales – The retail sales report for July, which shows consumer activity after the Brexit referendum, was released earlier. And, well, it was a total blowout.
Headline retail sales volume increased by 1.4% month-on-month, beating expectations of a measly 0.1% increase by a very wide margin (-0.9% previous). On an annual basis, this translated to a 5.9% expansion, which is significantly better than the expected 4.2% increase (4.3% previous).
Even better, the core readings also improved, with the monthly reading increase by 1.5% (0.3% expected, -0.9% previous) and the monthly reading advancing by 5.4% (3.9% expected, 3.9% previous).
On a more downbeat note, average store prices did fall by 0.8% month-on-month and by 2.0% year-on-year. But on a more upbeat note, the 2.0% fall is the smallest in the last 18 month. And on an even more upbeat note, all store types reported increases in retail sales volume on both a monthly and annual basis, so consumers didn’t seem fazed by the Brexit vote after all.
Risk appetite returns – Modest signs of risk-taking returned to European markets, with most of the major European equity indices printing gains.
- The pan-European FTSEurofirst 300 was up by 0.50% to 1,347.88
- The blue-chip Euro Stoxx 50 was up by 0.12% to 2,986.50
- The U.K.’s FTSE 100 was up by 0.08% to 6,864.50
- The DAX was up by 0.41% to 10,580.70
Commodities recover – Commodities continued to recover during the today’s morning London session after taking a trip to negative territory yesterday.
Precious metals were in demand, even though risk appetite was the prevailing sentiment:
- Gold was up by 0.52% to $1,355.80 per troy ounce
- Silver was up by 0.61% to $19.767 per troy ounce
Base metals were in very high demand:
- Copper was up by 1.25% to $2.179 per pound
- Tin was up by 0.31% to 18,357.50 per dry metric ton
- Nickel was up by 1.08% to $10,342.50 per dry metric ton
Oil benchmarks were also well supported:
- U.S. WTI crude oil was up by 0.73% to $47.13 per barrel
- Brent blend crude oil was up by 0.12% to $49.91 per barrel
The broad-based recovery in commodity prices was likely due to bargain buying after the Greenback softened a bit when the minutes of the July FOMC meeting got released.
ECB meeting minutes – The minutes of the first ECB meeting after the Brexit referendum revealed that ECB officials were in wait-and-see mode during the July meeting.
Specifically, ECB officials deemed it “too early to assess with any certainty the possible implications of these headwinds for the euro area economy and, ultimately, for the inflation outlook.”
As such, “it was widely felt among members that it was premature to discuss any possible monetary policy reaction.” ECB officials were open to further easing if needed, though.
In addition, ECB officials also discussed the banking crisis, particularly in Italy, and that European policymakers must put in place “adequate policy action and measures” in order “to address weak profitability and the remaining structural weaknesses in the euro area banking sector.”
Overall, nothing really new that we haven’t heard before during the July 21 ECB statement and presser, which is probably why the euro didn’t really react much.
Major Currency Movers:
GBP – The pound skyrocketed when the retail sales report was released. It then spent the rest of the session defending itself against predatory shorts. The pound managed to fight them off, though, which is why it was the king (or queen, if you like) of pips during the morning London session.
GBP/USD was up by 92 pips (+0.71%) to 1.3148, GBP/JPY was up by 139 pips (+1.07%) to 131.79, GBP/AUD was up by 187 pips (+1.11%) to 1.7122
JPY – Risk appetite made a comeback during the morning London session, dampening demand for the safe-haven yen in the process. Although it’s also possible that forex traders were just wary of loading up on the yen due to jawboning from Japanese officials during the Asian session.
USD/JPY was up by 40 pips (+0.41%) to 100.27, EUR/JPY was up by 53 pips (+0.47%) to 113.52, CHF/JPY was up by 62 pips (+0.60%) to 104.65
CHF – Despite the risk-on vibes, the safe-haven Swissy ended up being the second-strongest currency of the session. There was no apparent catalyst for this wonky price action, though.
USD/CHF was down by 19 pips (-0.20%) to 0.9580, NZD/CHF was down by 29 pips (-0.42%) to 0.6971, AUD/CHF was down by 44 pips (-0.60%) to 0.7355
AUD – The Swissy was not the only currency that exhibited some wonky price action, since the Aussie was doing it, too. Normally, the risk-on vibes + commodities rally combo would stoke demand for the higher-yielding Aussie. But that was not the case, at least during this session, since the Aussie ended up as the second weakest currency after the yen. Like the Swissy, there was no apparent catalyst for the Aussie’s wonky price action.
AUD/USD was down by 31 pips (-0.40%) to 0.7678, AUD/CAD was down by 32 pips (-0.33%) to 0.9846, AUD/NZD was down by 19 pips (-0.18%) to 1.0549
- 12:30 pm GMT: Canadian foreign security purchases ($17.23B expected, $14.73B previous)
- 12:30 pm GMT: Philadelphia Fed manufacturing index (2.0 expected, -2.9 previous)
- 12:30 pm GMT: U.S. initial jobless claims (265k expected, 266K previous)
- 2:00 pm GMT: U.S. CB leading indicator (0.3% expected, 0.3% previous)
- 2:05 pm GMT: New York Fed President William Dudley is scheduled to speak
- 8:00 pm GMT: San Francisco Fed President John Williams has a speech
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!