Today was another volatile morning London session. This time, however, directional movement was even more limited, likely because traders were hunkering down for the FOMC statement.
Even the pound, which surged higher when U.K. retail sales beat expectations, found itself giving back its gains and ending the session flat on some pairs.
However, there was notable demand for the comdolls, since they were all net winners during the session. The Kiwi, in particular, ended up as the best-performing currency of the session after surging higher pre-London open.
- German PPI m/m: 0.2% vs. 0.1% expected, 0.2% previous
- German PPI y/y: 2.6% vs. 2.5% expected, 2.3% previous
- U.K. retail sales m/m: 1.0% vs. 0.2% expected, 0.3% previous
- Core U.K. retail sales m/m: 1.0% vs. 0.1% expected, 0.5% previous
- U.K. retail sales y/y: 2.4% vs. 1.2% expected, 1.3% previous
- Core U.K. retail sales y/y: 2.8% vs. 1.4% expected, 1.5% previous
- FOMC statement and presser later
Choppy trading conditions
Price action was choppy across most currency pairs and directional movement was in short supply, very likely because forex traders are sitting on their hands ahead of the FOMC statement.
By the way, Forex Gump has his thoughts on that and you can read more on that here.
And if you want to see the presser live, the Fed usually has a live stream on its official youtube channel here.
U.K. retail sales report
Retail sales volume in the U.K. surged by 1.0% in August, which is much better than the +0.2% consensus. It’s also a much bigger increase compared to the upwardly revised 0.6% rise back in July (+0.3% originally).
Not only that, it’s also the strongest monthly reading in four months and marks the third month of ever stronger monthly readings.
Year-on-year, retail sales increased by 2.4%, which is double the consensus reading of 1.2% and faster than the previous month’s upwardly revised 1.4% increase (+1.3% previously).
The core reading also impressed by printing a 1.0% month-on-month increase as well. And similar to the headline reading, the previous core reading was also upgraded frp, +0.5% to +0.7%.
Year-on-year, the core reading increased by a solid 2.8%, which is also double the 1.4% consensus and a strong acceleration from the previous +1.7% increase.
The only disappointing thing is that retail sales in Q3 is still much weaker compared to Q2, since the reading for September has to surge by 2.9% in order to at least match the retail sales volume in Q2.
Commodities rally some more
Commodities extended their gains from yesterday’s rally by staging another broad-based rally during today’s morning London session.
Oil benchmarks had another good run.
- U.S. WTI crude oil was up by 1.16% to $50.48 per barrel
- Brent crude oil was up by 1.16% to $55.78 per barrel
Precious metals raked in more gains.
- Gold was up by 0.57% to $1,318.05 per troy ounce
- Silver was up by 0.68% to $17.396 per troy ounce
Base metals were broadly in positive territory this time. In fact, some base metals outperformed.
- Copper was up by 0.49% to $2.984 per pound
- Nickel was up by 2.25% to $11,425.00 per dry metric ton
The U.S. dollar was down by 0.14% to 91.49 for the day when the session ended. And that very likely sustained today’s broad-based rally.
Other than that, some market analysts also pointed to expected supply cuts in China as pushing prices for some base metals higher.
Meanwhile, other market analysts pointed to expectations that the increase in U.S. oil inventories will weaken because of Hurricane Harvey as the reason for the climb in oil prices.
Another skittish day in Europe
Most of the major European equity indices fluctuated but ended up in the red yet again during today’s morning London session.
And like yesterday, market analysts were pointing to skittishness ahead of the FOMC statement for the jittery and cautious sentiment in Europe today.
- The pan-European FTSEurofirst 300 was down by 0.11% to 1,499.47
- Germany’s DAX was down by 0.13% to 12,545.00
- The blue-chip Euro Stoxx 50 was down by 0.12% to 3,526.50
Major Market Mover(s):
Price action was kinda choppy, but comdolls were underpinned and closed the session higher against the rest of their peers, very likely because of another round of rallying commodity prices.
The Kiwi was particularly notable since it zoomed higher about an hour before the morning London opened, apparently because of a fresh election poll that was favorable for the National Party.
And it’s likely that the poll continued to fuel demand for the Kiwi since the Kiwi edged out its fellow comdolls to come out on top during today’s morning London session.
NZD/USD was up by 18 pips (+0.25%) to 0.7375 but was up by 62 pips (+0.85%) if pre-London move is included, NZD/JPY was up by 8 pips (+0.09%) to but was up by 82.08 59 pips (+0.73%) if pre-London move is included, NZD/CHF was up by 8 pips (+0.11%) to but was up by 0.7085 56 pips (+0.80%) if pre-London move is included
The pound jumped higher as a knee-jerk reaction to the upbeat retail sales report. However, the pound ended up sliding back down later. There were no clear catalysts, but it’s possible that forex traders were just cautious ahead of the FOMC statement.
Although it’s also possible that some market players were looking at the bigger picture and concluded that unless the August retail sales report is even better, then retail sales will likely be a drag on Q3 GDP.
GBP/USD was up by 23 pips (+0.17%) to 1.3534 after jumping to a session high of 1.3607 earlier, GBP/NZD was down by 13 pips (-0.08%) to 1.8349 after jumping to a session high of 1.8490 earlier, GBP/AUD was down by 11 pips (-0.07%) to 1.6798 after jumping to a session high of 1.6912 earlier
Watch Out For:
- 1:00 pm GMT: SNB quarterly bulletin will be released
- 2:00 pm GMT: U.S. existing home sales (5.48M expected, 5.44M previous)
- 2:30 pm GMT: U.S. crude oil inventories (2.8M expected, 5.9M previous)
- 6:00 pm GMT: FOMC rate decision and statement (target range for Fed
Funds Rate expected to hold steady at 1.00%-1.25%)
6:30 pm GMT: FOMC presser