- 12.11.2021 05:00 pm
- 19.10.2021 10:30 am
- 19.10.2021 10:30 am
Bank of England Governor Andrew Bailey hinted that the British central bank is likely to hike interest rates for the first time since the recent onset of the Covid-19 crisis. Speaking at a virtual panel discussion at the G-30 International Banking Seminar on Sunday, Bailey said that recent surge in energy prices risked higher inflation expectations. And that policymakers would have to act if medium term inflation expectations rose. At the close of New York on Friday, Sterling settled at 1.3745 against its opening at 1.3670 against the Greenback, up 0.36%. In early Asian trade this morning, GBP/USD rose modestly to 1.3755. On Friday, a surprise rise in US Headline September Retail Sales by 0.7%, higher than economist’s expectations of a 0.2% contraction lifted US stocks and bond yields but failed to impact the currency. The benchmark US 10-year Treasury bond yield climbed 6 basis points to 1.57%. UK ten-year Gilt rates settled at 1.10% from 1.04% Friday. Wall Street stocks were cheered by the upbeat data. The DOW rose 0.97% to 35,300 (34,927) while the S&P 500 gained 0.62% to 4,473 (4,440). The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of 6 major currencies, dipped to 93.95 from 94.00. Upbeat risk appetite and higher US bond yields boosted the Dollar against the Japanese Yen to 114.47 (113.67), overnight and three-year highs before easing to settle at 114.27. The Euro was little changed, finishing at 1.1600 (1.1597). New Zealand’s Kiwi (NZD/USD) rose 0.24% to 0.7068 (0.7038) while the Australian Dollar (AUD/USD) was last at 0.7420 (0.7417 Friday). Against the Emerging Market and Asian Currencies, the Greenback was mostly flat. The USD/CNH pair closed at 6.4300 (6.4350 Friday) while USD/SGD was last at 1.3480 from 1.3485.
Data released on Friday saw Japan’s Tertiary Industry Activity fall more than expected by -1.7% from a previous -0.6%, and forecasts at -0.3%. Italy’s August Trade Balance (Surplus) slipped to +EUR 7.32 billion, lower than median estimates at +EUR 9.23 billion. US September Headline Retail Sales rose 0.7% matching August’s rise of 0.7%, beating forecasts at -0.2%. Core US September Retail Sales were up at 0.8%, bettering expectations of 0.5%. US New York Empire State Manufacturing Index fell to 19.8 from a previous 34.3, missing estimates at 25.0. US Final Wholesale Sales in August slipped 0.3% against median estimates of 0.5%. Canada’s Final August Wholesale Sales eased to 0.3%, slightly lower than forecasts of 0.5%. US Preliminary University of Michigan Consumer Sentiment for October dipped to 71.4 from 72.8, and median expectations at 73.2.
On the Lookout: The week ahead see a modest economic data calendar. Today kicked off with New Zealand’s Q3 Annual CPI report which rose 2.2%, beating median estimates at 1.5%, and Q2’s 1.3% rise. The Kiwi (NZD/USD) spiked to 0.7107 highs from New York’s close at 0.7075, settling at a current 0.7095. The Australian Dollar was also higher, currently trading at 0.7435 (0.7420 Asia open).
China releases its trifecta of Retail Sales (f/c 3.3% from previous 2.5% - ACY Finlogix), Q3 GDP (f/c 5.2% from 7.9% - ACY Finlogix) and Fixed Asset Investment (f/c 7.9% from 8.9%). China’s Unemployment Rate is forecast to remain unchanged at 5.1%. China also releases its Industrial Production for September (f/c 4.5% at 5.3% - ACY Finlofix). There are no European or UK economic data released today on the calendar. Canada starts off North America with its September Housing Starts (f/c 255,000 from 260,200 – ACY Finlogix). The US rounds up the day’s reports with its US September Industrial Production (f/c 0.2% from 0.4% -ACY Finlogix), US September Manufacturing Production (f/c 0.1% from 0.2% - Acy Finlogix), US September Capacity Utilisation (f/c 76.5% from 76.4% - ACY FInlogix).
Trading Perspective: The upbeat US Retail Sales report failed to lift the US Dollar much higher against its Rivals apart from the yield sensitive Japanese Yen. Speculative market bets have been adding to their long Dollar positions which may have hit a peak. A corrective move lower may be in the making. The Dollar Index (USD/DXY) eased modestly to 93.95 from 94.00 at the start of trading on Friday. Last week, the popular gauge of the Greenback’s value against a basket of 6 major currencies rose to a September 2020 high at 94.56 before pulling back. The only reason the USD/DXY didn’t ease further on Friday was due to a rally in the USD/JPY pair. As the week kicks off, we can expect consolidation as more economic data is released. The culmination is Friday’s US Retail Sales.
The other factor that traders will monitor is Central Bank Speak. The BOE’s Bailey and ECB’s Lagarde both spoke over the weekend. The other global central banks are expected to follow the lead of the US Fed in tapering bond purchases. Traders will be watching for the timing and extent of tapering.
Happy Monday all, have a good trading week ahead.
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