Dollar is regaining its strength ahead of today’s FOMC meeting awaiting any indication of interest rates
The US Dollar extended its gains boosted by robust retail sales and a jump in the New York region’s business conditions. Meantime, weaker than forecast UK CPI saw GBP/USD slump 5 week lows. Geopolitical tensions eased as North Korea delayed a decision to fire its missiles at the US territorial island of Guam.
German Preliminary Q2 GDP: 0.6% against a forecast 0.7%. German Q1 GDP was revised up to 0.7% from 0.6%.
UK July CPI (Annualised): 2.6% against a forecast 2.7% and June’s 2.6%
UK July PPI Input (Monthly): 0.0 % against a forecast 0.4% and a previous -0.3%.
US July Headline Retail Sales: rose 0.6% against a forecast 0.3%. June’s retail sales were revised up to 0.3% from -0.2%. July’s retail sales reading was the largest gain since December 2016.
US July Core Retail Sales: rose 0.5% against a forecast 0.3%. June’s core retail sales were also revised higher to 0.1% from -0.2%.
US Empire State Manufacturing Index: jumped to 25.2 from a previous reading of 9.8 and a forecast of 10.1. The Index which measures business conditions was the highest in nearly 3 years.
US NAHB Housing Index: 68 against a forecast of 65 and a previous 64
Global stocks finished mixed. The US DOW was up 0.02% while the S&P 500 slipped 0.05%. The Japanese Nikkei rose 1% as geopolitical tensions eased.
Treasuries fell and yields rose. The benchmark US Ten Year Treasury yield closed at 2.27%, up five basis points from 2.22%. The German Ten Year Bund yield rose 3 basis points to 0.43%.
USD/DXY – finished higher at 93.857 from 93.444 yesterday.
EUR/USD – closed down at 1.1735 (1.1782 yesterday).
USD/JPY – jumped to end up at 110.70 from 109.70 yesterday.
GBP/USD – slumped to 5 weeks low at 1.2870 (1.2964 yesterday).
AUD/USD – lower, finished at 0.7822 from 0.7852 yesterday.
NZD/USD – fell to close at 0.7235 from yesterday’s 0.7285.
Outlook: The solid economic data released out of the US has put a bid tone to the Dollar. Expectations for a December rate rise have been increased. And a reduction of the Fed’s balance sheet next month is likely. German GDP, while solid, missed expectations. UK inflation data was softer than forecast. US data is continuing to improve, while that in Europe, although solid, is falling below expectations. The speculative market is still overall short of US Dollars. The combination of these factors should put the Dollar on more solid footing looking ahead.
Events and economic data out today:
Australia Q2 Wage Price Index (GMT 1.30 am, Aug 16/Local Time 11.30 am, Aug 16): Quarterly forecast 0.5% from previous 0.5%. Annualized forecast 1.9% from previous 1.9%
China July Foreign Direct Investment (GMT 2 am, Aug 16/Local Time 12 pm, Aug 16): The previous FDI for June was -0.1%. No forecast is available.
UK July Claimant Count Change, Average Earnings Index, Unemployment Rate (GMT 8.30 am, Aug 16/Local Time 6.30 pm, Aug 16): Claimant Count Change or the number of people claiming unemployment benefits: median forecast at 7,200 from previous 6,000. Average Earnings Index is forecast at 1.8% from the previous 1.8%. The July Unemployment rate is forecast at 4.5% from the previous 4.5%
Euro Zone Preliminary Q2 GDP (GMT 9 am, Aug 16/Local Time 7 pm, Aug 16): Quarterly forecast is for 0.6% from the previous 0.6%. The Annualised forecast is forecast at 2.1% from 2.1%
US July Building Permits and Housing Starts (GMT 12.30 pm, Aug 16/Local Time 10.30 pm, Aug 16). Forecast for Building Permits is 1.25 million for July against June’s 1.254 million. Housing Starts are forecast at 1.22 million from 1.215 million.
US FOMC Meeting Minutes (GMT 6 pm, Aug 16/Local Time 4 am, Aug 17) This is the release of the meeting minutes of the FOMC’s July 25/26 meeting.
Trading View: The Dollar should consolidate it gains around the recent trading ranges today. The big event is the FOMC meeting minutes released later on. This is a more detailed record of the Fed’s most recent meeting last month. The minutes will center on the debate within the Fed on the outlook for inflation. Any signals that will address the market’s uncertainty of a December rate hike will be closely watched. Could be a fiery start in Asia tomorrow.
EUR/USD – rallied off its lows at 1.16873 to finish at 1.1735. The support at 1.1680/90 is strong and should hold for now. The German GDP data missed expectations and this may impact the Euro Zone’s GDP reading tonight. A sustained break of the 1.1680 level could see EUR/USD back as low to 1.1570 initially. Immediate resistance for the Euro is found at 1.1760. There is short term support at 1.1700 and then 1.1680. Likely range today: 1.1695-1.1755.
AUD/USD – The RBA released it’s minutes from its the latest meeting earlier this month yesterday. The Australian central bank added nothing new. The RBA reiterated that further Aussie strength (referring to the TWI) would impact growth and inflation. The Aussie held the 0.7800/10 support level well with the overnight low at 0.78078. Industrial metal prices continued their slide last night. The CRB (Commodity Research Bureau) Index fell 0.6MT4 EUR/USD H4 Chart7%. Further broad-based US Dollar strength will pressurize the Aussie lower. There is immediate resistance at .7860. Support for the AUD/USD is found at 0.7810. Likely range 0.7800 50. Sell rallies.
GBP/USD – Sterling fell 0.74 % last night on the combination of weaker UK data and stronger US data. The data print is now in favor of the Dollar. Further evidence could be seen later with the release of economic data from both. The Pound also fell against the Euro. Sterling has immediate resistance at 1.2900 and 1.2930. Immediate support is found at 1.2850 (overnight low 1.28464). Likely range today 1.2850-1.2900.
USD/JPY – rallied to trade to an overnight high of 110.846 before settling at 110.70. The Dollar rose as geopolitical tensions eased. The release of the robust economic data saw US yields climb with the Ten year bond closing at 2.27%, up 5 basis points. In contrast, the Japanese 10 year JGB bond yield was at 0.03%, 1 basis point lower (0.04% yesterday). The widening differential will keep the USD/JPY bid. There is immediate resistance at 110.85. Further resistance can be found at 111.10. Good support lies at 110.30 and then at 110.00. Likely range today 110.20-110.90.
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