Market Drivers December 14, 2017
Europe and Asia
AUD: AU Employment 61.6K vs. 19.2K
EUR: EZ Flash PMI 58 vs. 57.2
GBP: UK Retail Sales 1.1% vs. 0.4%
North America
GBP: BoE 07:00
EUR: ECB 08:30
USD: Retail Sales 8:30
Australian employment shocked the market with yet another stunning gain sending Aussie above the .7650 in early Asian trade.
Australia generated 61K new jobs versus 19K eyed as the unemployment rate remained steady at 5.4% while participation rate climbed to 65.5% from 65.1% the month prior. The news caps an incredibly strong year for jobs in the Australian economy which saw employment expand at 3.2% pace in 2017. Furthermore, fully 80% of the jobs have been full-time jobs suggesting that broader GDP growth should remain sound for the foreseeable future.
Over the past few months, the Australian economy has been dogged by weak Retail Sales, muted inflation, and sagging housing prices all of which have weighed on demand and have kept the RBA firmly in neutral territory. But the solid pace of job growth stands as a stunning counterpoint to the recent soft data and should translate into better demand into the start of 2018. At the very minimum, today’s data should provide support for the Aussie above the .7500 figure over the near-term horizon.
Elsewhere, the data beat the forecast as well with EZ PMI climbing to 58 from 57.2 and IFO raising German GDP to 2.6% in 2018 from 2.0% prior as the economic engine of Europe may challenge the growth rates in the US next year.
In the UK Retail Sales beat, handily coming in at 1.1% versus 0.4% with numbers improving across the board ahead of the holiday shopping season. Cable saw a mild spike above the 1.3450 but remains anchored around those levels as markets await the statement from BoE. Traders are looking for any reaction from UK monetary officials to the recent progress in Brexit negotiations and should the tone of the statement improve, sterling could quickly pop to the 1.3500 level.
Later on the day we will see US Retail Sales with markets looking for an improvement from the period prior. Inflation and consumer demand have been the two primary stumbling blocks to Fed’s normalization policy and if today’s data disappoints as well, USD/JPY could continue to drift towards the 112.00 figure. A better read, however, could propel it above 113.50 as markets begin to price in a tighter monetary policy.
As to the ECB, the focus will be on any guidance with respect to the QE taper as well as the assessment of growth going forward. Mr. Draghi is not expected to offer much fresh info, but if the tone sounds upbeat given the recent strength of data, the EUR/USD could quickly catch a bid and push its way towards the 1.1900 figure as the day proceeds.