Market Drivers February 16, 2018
- USD/JPY breaks 106.00
- UK Retail Sales miss
- Nikkei 1.19% DAX 0.96%
- Oil $61/bbl
- Gold $1359/oz.
- Bitcoin $9700
Europe and Asia
GBP: UK Retail Sales 0.1% vs. 0.5%
North America
USD: Housing Starts 8:30
USD: Building Permits 8:30
After setting fresh lows against yen and euro today, the dollar stabilized and appeared ready to rebound in morning London dealing.
Earlier USD/JPY hit fresh multi-month lows dropping to 105.54 before finally finding its footing and rising back through the 106.00 figure. Japanese officials remained relatively nonplussed about the recent yen strength, primarily because yen rise on a trade-weighted average has been much more muted than its gains against the dollar. Nevertheless, it's clear that policymakers in Japan are feeling distinctly uncomfortable with yen’s recent gains and would like to see the pair closer to 110.00 rather than 105.00.
Overnight, Japanese Prime Minister Abe reappointed BOJ Governor Kuroda to another term, and some markets participants speculated that Mr. Abe expedited his decision in part as a response to calm the market and arrest the rapid decline in USD/JPY. So far the news had little impact on the market but could be just the type of catalyst needed for a small short-covering rally in the pair which remains grossly oversold.
In economic news, UK Retail Sales came in weaker than expected at 0.1% versus 0.5% eyed and after a few minutes of holding still cable finally gave way with GBP/USD dropping below the 1.4100 figure. UK economy remains in a problematic state as consumer demand continues to be soft but inflation pressures rise. Under those conditions its difficult to see how the BOE can maintain its hawkish stance and if next month’s numbers disappoint, the market will begin to question the prospect of the rate hike this year.
With only a smattering of second-tier housing data on the docket today, the economic calendar will not have any impact on trade today and instead, we may see short covering flows in the dollar after a brutal week of selling. USD/JPY which is the most oversold could see 107.00 by day’s end as late shorts scramble to cover, especially if US equity flows prove supportive.