Market Drivers July 20, 2017
Europe and Asia
AUD: AU employment 14K vs. 15K
GBP: UK Retail Sales 2.9% vs. 2.5%
North America
ECB: Rate Decision 7:45
ECB: Presser 8:30
USD: Weekly Jobless rate 8:30
USD: Philly Fed 8:30
It was a whipsaw night of trade in the FX market as both Aussie and cable came under heavy selling pressure despite better than expected economic data that normally would have led to sustained rallies. In Australia, the employment data came in much better than expected. Although the headline number just missed the forecast at 14K vs. 15K, the full-time employment numbers showed a very impressive gain of 62K indicating that labor demand Down Under continues to be very strong as the economy transitions from mining to services.
Aussie popped to .7990 but the key .8000 figure proved to be too much for the bulls and the pair quickly sold off, tripping stops along the way. It has put in a major move over the past several weeks and was due for some profit taking, but the fundamentals in Australia argue for a stronger currency as the recent growth spurt will likely push the RBA off its neutral stance and after some consolidation Aussie is likely to make another run at the .8000 in the foreseeable future.
In UK the Retail Sales numbers came in at 2.9% vs. 2.5% eyed, but ahead of the release cable was shellacked by the news that PM May is likely to stay on in her post. Ms. May is seen as a very weak leader by the market and her Brexit strategy appears to be in shambles right now. Cable sold off ahead of the news release and even better than expected data could not keep the unit higher as sellers pushed it towards the 1.2950 level. The risk with the pound remains primarily political and until the market sees some progress on the Brexit talks the pair could see more selling over the near term horizon.
In North America today the focus will be squarely on the ECB presser with the market looking for some guidance from Mr. Draghi as to the timeline for the taper. The ECB chief may walk a fine line, however, as he tries to balance the positive news in EZ growth with the need to keep the rally in EUR/USD contained. To that end, he may choose to remain relatively non-committal for the time being to prevent the market from taking the EURUSD through the 1.1600 figure prematurely. Still, the pair remains in a strong uptrend and any pullback today will be an opportunity for long term bulls to get in at better prices.