Market Drivers for May 19, 2016
Europe and Asia
AUD: Employment 10.8K vs. 12.0K eyed
GBP: UK Retail Sales 1.3% vs. 0.7%
North America
USD: Weekly jobless 8:30
USD: Philly Fed 8:30
It's been a relatively quiet night of trade in the currency market after yesterday's post FOMC minutes fireworks which saw the dollar strengthen across the board.
The buck remained well bid in Asian and early European trade today but the follow-through from yesterday's rally has been subdued, with USD/JPY coming back towards the 110.00 level as risk aversion flows pressured the pair in European dealing.
In Australia the labor data come in generally in-line with 10.8K jobs generated versus 12K eyed. The unemployment rate decreased by 10bp to 5.7% from 5.8% the month prior. However, the headline data hid some underlying weakness as all of the gains were part-time jobs. Full time employment actually decreased by -9.3K. Full time jobs have been contracting for the past three months and as a result, the aggregate number of hours worked also declined by 1.1%.
Although the Aussie labor numbers are unlikely to expedite any further easing by the RBA, the clear deterioration in growth set up the stage for yet another rate cut, possibly in August. The AUD/USD saw little reaction on post news trade but eventually drifted towards the .7200 figure before finding some support.
In UK the economic news was considerably better, with Retail Sales jumping a healthy 1.3% versus 0.7% eyed. The prior month data was also revised higher at -0.5% versus -1.3% previously reported. Retail Sales is notoriously volatile report and some of the gains in April were driven by heavy discounting, but the number nevertheless suggests that consumer demand remains robust and that some of the Brexit concerns are starting to wear off.
Cable rallied to 1.4665 on the news but then drifted lower on some profit taking. After rising more than 200 points since yesterday it's due for a pause, but with Brexit concerns receding as most major polls now indicate Remain with a significant lead, the pair could push to 1.4700 as the day proceeds.
In North America today the calendar is light with only Philly Fed and jobless claims on the docket. The post FOMC rally has run into a bit of a stall, with risk aversion flows offsetting some of the USD/JPY gains. Equity markets trade could be affected later today if the selloff accelerates, but given the clear change of sentiment from the Fed, and the very likely possibility that the Fed will hike rates another 25bp at the June meeting, USD/JPY remains a 'buy-the-dip' trade for now.