Market Drivers May 8, 2018
Europe and Asia
AUD: AU Retail Sales 0.0% vs. 0.3% eyed
EUR: GE Trade Balance 22B vs. 19B
North America
CAD: Housing Starts 8:30
Euro hit fresh 2018 lows today as shorts managed to push past the key 1.1900 support level in morning London dealing today as further evidence of a slowdown in the German economy and risk aversion flows helped the move.
German Trade Balance came in better than expected at 22B vs. 19B eyed, but the headline number was deceiving as both exports and imports missed their mark with the later rising just 1.7% versus after falling -3.2% the period prior. It is becoming more evident that global growth is slowing in Q2, which will make any sort of monetary tightening exceedingly difficult for G-11 central banks.
The phenomenon appears to be nearly universal as Australian Retail Sales also surprised to the downside printing at 0.0% versus 0.3% eyed. This was a sharp retreat from 0.6% rise in February indicating that consumer demand Down Under remains muted. Aussie dropped below the .7500 figure hitting fresh lows at .7455.
The focus today, however, is on geopolitics rather than economics as markets await the Trump administration announcement regarding the Iran nuclear deal. The consensus view is that US President Donald Trump may choose to pull out of the deal, although everyone from Germans to the French and even the Russians are urging for the US to remain in the deal. Even if Mr. Trump signals that he wants to leave the deal and will not waive sanctions against Iran, there is a 180-day review process during which some sort of accommodation may be worked out.
In either case, the market appears to be gearing up for sell the news moment as oil prices fade from the highs and USD/CAD bulldozed its way through the supply at 1.2900 to hit a high of 1.2985 before pausing for rest. If Mr. Trump does signal some flexibility risk aversion flows may lift and euro and cable could bounce as the day proceeds.