Daily Market Update

Sterling Continues Its Run; Dollar Falling on Retail Sales

September 15, 2017

The U.S. dollar traded defensively against most of its majors, save the Japanese yen, overnight. The trend is likely to continue in early trading on the back of poor economic data.

USD

The U.S. dollar traded defensively against most of its majors, save the Japanese yen, overnight. The trend is likely to continue in early trading on the back of poor economic data. Advanced retail sales for August fell 0.2%, missing expectations of a 0.1% increase. July’s print was also downwardly revised to 0.3% from an initial reading of 0.6%, according to the Commerce Department. The Commerce Department said in a special note that it couldn’t isolate the effect of Hurricane Harvey on the data because it tracks activity on a national scale, leading some to think that the negative print may be a one-off. However, that would still not excuse July’s downgrade.

Industrial production and the University of Michigan consumer sentiment survey will be released later this morning.

Furthermore, we will look for further developments surrounding a possible tax reform plan and the fallout of the latest saber-rattling from North Korea.

 

JPY

You would be excused if today’s Japanese yen movement seems confusing. The traditional-safe haven currency initially rallied following reports that North Korea fired a ballistic missile over Japan. However, those gains were reversed within minutes. Scotia bank is calling it “missile fatigue”, which seems fitting.

Nevertheless, we will continue to keep an eye on developments on the Korean peninsula as Kim Jong-un appears to be lashing out for attention. As one analyst put it, “the chubby boy is out of control.”

 

GBP

The British pound surged to its highest level since the Brexit vote last summer on continued hawkish developments surrounding the Bank of England. The pound’s move started yesterday as policy makers said that markets were underestimating the possibility of future rate hikes by the BoE. The rally continued overnight following hawkish comments from a famously dovish member of the Bank of England. Gertjan Vlieghe said that “the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise” while speaking in London. He continued to say that if the economy continues apace, the appropriate time “might be as early as in the coming months.” The comments send the odds of a rate hike soaring and took the sterling along for the ride.

The sterling was also able to shrug off an apparent terrorist attack on the London Underground. At the time of writing, 22 people were taken to the hospital but nobody has died.

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