Risk Appetite Returns

15 August, 2017

North Korea’s official news agency reported on Monday that leader Kim Jong Un will watch the actions of the United States for a while longer before making a decision to fire missiles at Guam. President Trump did not respond to this latest comment but Defense Secretary Mattis warned that the US Military is ready to intercept any missiles fired by North Korea. This latest “war of words” relieved market concerns with a move away from safe havens and a degree of risk-on sentiment. To add to USD demand was the recent comments made by New York Federal Reserve President Dudley who, on Monday, suggested that if economic data holds up then it was not unreasonable to think that the FOMC would begin trimming its $4.2 trillion balance sheet next month and hiking interest rates by the years’ end. In the early hours of Tuesday morning the minutes from the last Reserve bank of Australia policy meeting put the focus back on household debt. The RBA, in keeping to its monetary policy, commented for the “need to balance the risks associated with high household debt in a low-inflation environment”.

EURUSD gave up recent gains as USD demand increased. Overnight EURUSD has traded as low as 1.1768 and currently trades around 1.1780.

USDJPY has gained over 0.7% overnight, reaching a current high of 110.42, as demand for safe haven JPY has diminished. Currently USDJPY is trading at the daily high.

GBPUSD is generally flat from last nights close. Currently GBPUSD is trading around 1.2965.

Gold declined 0.5% overnight, following comments from Kim Jong Un, to trade as low as $1,272.97. Currently Gold is trading around $1,275.

WTI fell on Monday as fears of falling oil demand in China overshadowed news that Libya’s crude supply was disrupted. WTI added 0.2% overnight to currently trade around $47.75pb.

A plethora of US economic data will help give some indication as to whether H2 GDP will outperform H1. July retail sales are expected to rise from June, while housing starts and industrial production may be muted.

At 09:30 BST UK National Statistics will release Consumer Price Index (YoY) for July. Market consensus is calling for 2.7% from the previous reading of 2.6%. Inflationary pressure will add more credibility to a Bank of England rate hike later this year.

At 13:30 BST US Census Bureau will release Retail Sales (MoM) for July. Consensus is calling for a robust increase to 0.4% from the previous poor reading of -0.2%. An increase will help the FOMC adhere to their plans to have one more rate hike this year.


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