FX Update

Strong US retail sales data firms dollar, Brexit comments push pound lower

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US data delivered this morning beat expectations and firmed the greenback to 1-week highs. Both UK prime minister front runners denounced an Irish backstop Brexit agreement, sending the pound to 27-month lows. The Fed’s Powell is due to speak in Paris later today and markets will read into his remarks for an indication of how dovish the Fed has become.

"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!'"

Jack King, Nasa Chief of Public Information, July 16, 1969
  • FX Rates
    July 16, 2019

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    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.

    Brexit 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.

    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.

    The 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.

    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.

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Kathryn Garvey
Kathryn Garvey

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