North Korea fired another missile over
Japan into the Pacific Ocean on Friday. The regimes defiance towards
recent UN sanctions has had a mooted effect on the markets as many are
growing accustomed to Pyongyang’s actions.
In an unsurprising move on Thursday,
the Bank of England’s Monetary Policy Committee voted 7-2 to keep UK
interest rates at 0.25%. The minutes of the meeting commented that there
is a “slightly stronger picture” for the UK Economy with a strong labour
market, continued housing demand and the recent improvement in retail
sales. Such rhetoric has many believing that, if wage growth continues to
rise, the possibility of a rate hike may occur earlier than expected.
Following the meeting,
GBPUSD rose over 1.4% to reach 1.34038 – a level last
seen 12 months ago.
On Thursday, data from the US Labour
Department revealed a rise to 0.4% in August in the Consumer Price Index
– bettering July’s insipid 0.1% increase. Core CPI is running at 1.7%,
which is likely to provide some much-needed assistance to the Fed and its
2% inflation target. Following the data release, the likelihood of a US
rate hike in December increased to 50.9% from 41.3%, per CME#’s FedWatch
Tool. More data showed the US Labour market staying strong, as initial
claims for unemployment benefits declined 14K. The seasonally adjusted
rate of 284K (week ending September 9th) is below the 300K threshold for
132 weeks – the longest such run since 1970. The strong labour market
appears to be helping, finally, push inflation higher. Market focus will
now center around next week’s FOMC meeting for more clues on US
economic policy and the timing of tightening in the months ahead.
EURUSD climbed, after hitting a 2-week low on
Thursday, to currently trade around 1.1920.
USDJPY is little changed and currently trades around
110.40.
GBPUSD hit a 1-year high on Thursday and has
maintained upwards momentum overnight to currently trade around 1.3410.
Gold was relatively flat and currently
trades around $1,330.
WTI slipped overnight, after gaining
over 1% on Thursday. Currently, WTI is trading around $50.20.
Major economic data releases for today:
At 11:00, Eurostat will release
Eurozone Trade Balance for July. Consensus is suggesting €21.4B from the
previous release of €26.6B. With relatively good economic growth in the
Eurozone the markets will likely only react if the data is significantly
different than expected.
At 13:30, the US Census Bureau will
release the “much anticipated” Retails Sales (MoM) report for August. The
previous strong reading of 0.6% is not expected to be beaten with the
release today – consensus is suggesting a figure of 0.1%. As a good
indicator of consumer spending, the markets will be hoping that the
release stays in positive territory. A negative release will cause a
weakening in USD and add volatility into the markets.
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