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European currencies sprang back to action as speeches by ECB head Draghi and U.K. Prime Minister May were on traders’ radars while the Aussie was left eating dust. The rest of the comdoll gang also stayed in the red, still reeling from the Fed’s renewed tightening expectations.

  • Canadian wholesale sales up 1.5% vs. projected 0.7% decline
  • U.S. initial jobless claims down from 282K to 259K vs. 302K forecast
  • Philly Fed manufacturing index rose from 18.9 to 23.8 vs. 17.3 consensus
  • U.S. house prices up by 0.2% in July vs. projected 0.4% gain
  • ECB head Draghi: Financial system risks no longer pose a threat to economy
  • U.K. PM May to offer 20 billion EUR in transitional deal to EU?

Major Events/Reports

Mostly upbeat U.S. reports

Greenback bulls were able to enjoy the afterparty from the FOMC decision thanks to stronger than expected reports from Uncle Sam. However, the U.S. currency had to give up some of its intraday gains as currency-specific factors came into play later on.

Nonetheless, U.S. initial jobless claims improved from 282K to 259K instead of rising to the projected 302K figure to indicate positive momentum in hiring. This marks back-to-back upside surprises and consecutive weekly declines in the number of blokes claiming unemployment-related benefits.

The Philly Fed index jumped from 18.9 to 23.8 to reflect a stronger pace of industry expansion instead of dipping to the consensus at 17.3. Underlying components indicated that the pickup was mostly due to an increase in hiring activity and widespread gains in price levels, sending positive vibes for both employment and inflation.

The U.S. CB leading index also posted a stronger than expected 0.4% reading versus the 0.3% estimate. On a not-so-upbeat note, the house price index for July reflected a meager 0.2% uptick versus the estimated 0.4% gain.

Brexit transition deal in the works?

All eyes and ears are on U.K. Prime Minister Theresa May as she prepares to deliver her Brexit speech in Florence today. Prior to the event, rumors swirled that she would put a “transitional deal” worth 20 billion EUR on the table in order to speed up negotiations and maybe grease the EU’s hand into giving in to the Brits’ requests.

In line with this, she is expected to propose a two-year transition period for both parties to hash things out, during which the U.K. can retain access to the single market even after the official split happens on March 2019.

However, reports are also indicating that EU leaders went “Thanks, but no thanks” to the invitation as none are expected to be in attendance for May’s speech. Instead, No. 10 will simply be addressing members of the U.K. parliament and other government officials.

In any case, this is still considered to be the strongest form of intervention that May will be making to date, although many are also thinking that the speech will fall on deaf ears. Note that another round of Brexit talks will kick off by September 25.

Major Market Mover(s):

EUR & GBP

The mood was a bit more cheery in the European markets, with ECB head Draghi declaring that the financial sector no longer poses a threat to the economy and traders looking forward to how PM May’s speech might turn out.

EUR/JPY is up 88 pips to 134.34 (+0.88%), EUR/NZD is up to 1.6317 (+1.00%), and EUR/CHF is testing the 1.1600 handle (+0.56%). GBP/JPY advanced to 152.80 (+0.90%), GBP/CHF is up to 1.3188 (+0.79%), and GBP/USD rose from 1.3494 to 1.3580 (+0.64%).

AUD

Aussie bears painted the forex town red as the commodity currency was weighed down by the RBA’s shaky tightening bias, the credit rating downgrade on China, and the sharp drop in gold prices.

AUD/USD is down 98 pips to .7933 (-1.22%), AUD/CAD fell to a low of .9772 (-1.16%), AUD/CHF is down to .7705 (-1.07%), and AUD/JPY fell from 90.12 to 89.26 (-0.93%).

Watch Out For:

  • U.K. Prime Minister May’s Brexit speech