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AFEX Market Watch Mon Aug 8th
• 12:01 GBP BRC Retail sales
Tues Aug 9th
· 07:00 EUR German trade balance
· 09:30 GBP Manufacturing production MoM
· 09:30 GBP Goods trade balance
· 15:00 GBP NIESR GDP estimate
Wed Aug 10th
· 04:05 AUD RBA Gov Stevens speaks
· 15:30 USD Crude oil inventories
· 22:00 NZD RBNZ OCR and statement
Thu Aug 11th
· 13:30 USD Unemployment claims
· 23:45 NZD Retail sales QoQ
Friday Aug 12th
· 03:00 CNY Industrial production YoY
· 07:00 EUR German Prelim GDP QoQ
· 13:30 USD Core retail sales MoM
· 13:30 USD PPI MoM
· 13:30 USD Retail sales MoM
· 15:00 USD Prelim UoM Consumer sentiment
In extraordinary times there are extraordinary measures. Hence last week the Bank of England decided to throw the proverbial kitchen sink at the UK economy. BoE Governor Carney assured the market of his dedication to support the UK economy to the utmost and promised more support if needed so the market is currently pricing in this new intention. On top of this move by the BoE we had US jobs data which showed a surprisingly strong number. The Dollar duly rallied and Sterling continued its descent although it is worth noting that the speculative market has already sold sterling at higher levels and is holding this position. This week manufacturing and industrial production set for release on Tuesday will give us economic data for July and is one of the first complete data release since Brexit. The RICs house price balance on Wednesday will give the market an update on the latest price moves for the UK property market.
As Europe is on holiday at the moment it seems like the currency is as well. It took the US jobs data to wake it up but as the Euro has plenty in store for it in Q3 so it is probably best to let sleeping dogs lie.
The Dollar was under pressure last week as the market is calling the Fed’s bluff and suggesting that Janet Yellen and co. will not be able to put US rates up this year. It was given a fillip by Sterling’s weakness last Thursday and then Friday saw an excellent but also surprising 255k new jobs being added to the US economy. So the dollar ended on a very positive note and the market will look for confirmation of this strength from this coming Fridays retail sales number. On the political side of the story it seems like Hillary Clinton is pulling ahead of Donald Trump in the race for the White House with polls showing her in the lead by either 15 or 9 points. Donald Trump is making very obvious and damaging mistakes and in doing so is handing Clinton the Presidency. On the other hand the Clinton Foundation (Hillary and Bill Clinton’s charity) is being investigated by the FBI. The allegation is that large donors to the foundation received favours or beneficial treatment from the US Government while Clinton was secretary of state.
Commonwealth et al
The oil price managed to bounce and helped the Loonie gain ground on Friday morning but the afternoon was a totally different story as the US jobs report was very positive for the US Dollar while the Canadian jobs data was poor with employment falling 31.2k and the trade deficit widening to CAD 3.6 bio. The Loonie weakened very quickly after this double whammy. The AUD pushed up after a rate cut last week and we now wait for the RBNZ to cut rates on Wednesday. The market has an 80% probability of a rate cut for the NZD priced in and is now wondering whether it will be 25bps or 50bps and the RBNZ will not want the NZD to bounce as the AUD did after last week’s rate cut. The AUD and NZD are both set to benefit from the carry trade logic which sees investors looking to benefit from higher rates when compared to other currencies.
The Yen strengthened last week as the market rejected the Governments stimulus package and with so much event risk in the World the JPY is the stand out choice for stability. However, it has started on the back foot against the Dollar this week.
Have a good week.
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