Dollar Rally Stalls, But Bid Remains
Market Drivers May 19, 2016
AU Labor data in line
UK Retail Sales Strong beat
Nikkei -0.01% Dax -1.59%
Oil $47/bbl
Gold $1255/oz.
Europe and Asia:
AUD Employment 10.8K vs. 12.0K eyed
GBP UK Retail Sales 1.3% vs. 0.7%
North America:
USD FOMC Weekly jobless 8:30
USD Philly Fed 8:30
It's be a relatively quiet night of trade in the currency market after
yesterday's post FOMC minutes fireworks that saw the dollar strengthen
across the board.
The buck remained well bid in Asian and early European trade today but
the follow through from yesterday's rally has been subdued with USD/JPY
coming back towards the 110.00 level as risk aversion flows pressured
the pair in European dealing.
In Australia the labor data come in generally in line with 10.8K jobs
generated versus 12K eyed. The unemployment rate decreased by 10bp to
5.7% from 5.8% the month prior. However the headline data hid some
underlying weakness as all of the gains were part-time jobs. Full time
employment actually decreased by -9.3K. Full time jobs have been
contracting for the past three months and as a result the aggregate
number of hours worked also declined by 1.1%.
Although the Aussie labor numbers are unlikely to expedite any further
easing by the RBA, the clear deterioration in growth set up the stage
for yet another rate cut possibly in August. The AUD/USD saw little
reaction on post news trade but eventually drifted towards the 7200
figure before finding some support.
In UK the economic news was considerably better with Retail Sales
jumping a healthy 1.3% versus 0.7% eyed. The prior month data was also
revised higher at -0.5% versus -1.3% previously reported. Retail Sales
is notoriously volatile report and some of the gains in April were
driven by heavy discounting, but the number nevertheless suggests that
consumer demand remains robust and that some of the Brexit concerns are
starting to wear off.
Cable rallied to 1.4665 on the news but then drifted lower on some
profit taking. After rising more than 200 points since yesterday it's
due for a pause but Brexit concerns receding as most major polls now
indicate Remain with a significant lead the pair could push to 1.4700 as
the day proceeds.
In North America today the calendar is light with only Philly Fed and
jobless claims on the docket. The post FOMC rally has run into a bit of a
stall with risk aversion flows offsetting some of the USD/JPY gains and
equity markets could impact trade later today if the selloff
accelerates, but given the clear change of sentiment from the Fed and
the very likely possibility that the Fed will hike rates another 25bp at
the June meeting USD/JPY remains a buy the dip trade for now.
