Strong US retail sales data firms dollar, Brexit comments push pound lower
Kathryn Garvey | July 16, 2019
"10, 9, ignition sequence start, 6, 5, 4, 3, 2, 1, zero. All engines running. Liftoff! We have a liftoff! Thirty-two minutes past the hour. Liftoff on Apollo 11!'"
July 16, 2019
EUR/USD 1.1221 GBP/USD 1.2419 USD/CAD 1.3037 AUD/USD 0.7030 USD/JPY 108.17 USD/CNH 6.8788 USD/ILS 3.5477 USD/MXN 19.0287 USD/CHF 0.9872 USD/INR 68.7137
In the last major piece of the consumer spending story for Q2, US retail sales advanced 0.4% vs 0.2% expected, firming the greenback. Industrial production for June came in unchanged at 0% vs 0.1% expected. Markets will again focus on Fed Chairman Powell’s speech later today in Paris for more indication on how dovish the Fed is.GBPBrexit remains the main driver of investor sentiment for UK assets and the pound. Wages grew at the fastest pace in 11 years and unemployment remains low – a combination that has served as a good indicator of increased inflation leading to BOE rate hikes - in turn leading to a stronger pound. However, the pound dropped to 27-month lows overnight after PM front runners Johnson and Hunt both attempted to out-gun each other to have the strongest stance on Brexit.EUR
The euro hit an 8-month low after German ZEW Economic Sentiment further deteriorated to -24.5 vs an expectation of -22. ECB Governing Council Francois Villeroy de Galhou said in Paris, “We are data dependent…we will assess actual economic data and we will act accordingly if and when needed”. Eurozone’s trade surplus expanded in May, potentially stirring concerns about reigniting trade war rhetoric from the US.CADThe loonie was holding around 8-month highs before US data released this morning. WTI prices held steady after production in the Gulf of Mexico resumed after shutting down before Hurricane Barry. Strong data out of the US sent the currency slightly lower.ASIA/PACIFIC
Asian currencies were mostly steady ahead of US retail sales and industrial production data which may be a signal of how aggressive Fed rate cuts could be. US Treasury Secretary Mnuchin said he may travel to Beijing soon if trade negotiations are productive this week.
China’s yuan firmed slightly vs the US dollar after traders bet on government support in the coming months to provide stimulus to their slowing economy.