Pound knocked off perch by weak data

12 May, 2017

Our prop desk is looking rather quiet as we run into the weekend break. We have some short interest on EUR/USD but that’s not proving universally positive, whilst long USD/CHF trades are currently sitting in the money.

We have a relatively quiet end to the week, with the effervescent political agenda of late calming down and not that much of note sitting on the economic agenda, either. Yes there’s a flurry of numbers due from both the US and the Eurozone, but little that seems likely be ground-breaking.

Sterling had seen a resolute run at the start of the week, with the currency failing to have been derailed by the prospect of France’s new President hardly being sympathetic towards Brexit, and gradual gains being seen across the board as a result. However yesterday’s ‘Super Thursday’ of UK economic data underwhelmed the market and it was topped off with Mark Carney cautioning that the country’s consumer slowdown has now begun, wages will not keep up with price rises and the unexpected boost in the wake of the Brexit referendum result is now very much in the past. Given that assessment, the more surprising point may be that the pound hasn’t actually fallen any further.
US retail sales figures are due for release at 12.30pm GMT today and an upbeat print here could fire concerns again over rising US inflationary pressures. Helpfully, the figure is accompanied by some average earnings data too, which is by all accounts seen as the  more important metric to follow. As we’ve said in recent days, the Fed’s June meeting remains a live one and if Janet Yellen is aiming to meet the target of three rate hikes in 2017 then delivering the second before the summer break is arguably going to be critical in meeting that goal.

Yesterday’s dovish talk from the RBNZ knocked the kiwi dollar down to lows not seen since last May and the currency continues to languish. However, 10.45pm GMT on Sunday night sees the release of the country’s Q1 retail sales readings and anything that looks too hot here is likely to call into question the central bank’s attempts to maintain a dovish outlook over monetary policy and could precipitate some opportunistic profit taking from yesterday’s sell-off.

With the Reserve Bank of Australia showing some conern over the state of the domestic housing market, the country’s home loan data that’s due for release at 1.30am GMT on Monday morning could provide some fresh direction here. The RBA is taking a sanguine approach to monetary policy, but is aware property prices are overheating. Some select intervention could be deployed here, but if we see a slump in the number of new loans being written then that certainly takes some pressure off and could well result in a reversion for crosses like AUD/NZD, which rallied hard in the wake of the RBNZ call yesterday.

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