Today’s Key Market Drivers – 16th August 2017

The Pound took a beating overnight and the US Dollar rallied after UK CPI data disappointed and US Retail Sales beat the market’s expectations. Let’s wrap up what took place throughout the trading day Tuesday.

  • RBA monthly minutes failed to impact the AUD.
  • German 2nd Quarter GDP data beat the market estimates and helped support the Euro.
  • UK CPI data missed estimates, which backs up the Bank of England’s recent comments.
  • US Retail Sales impressed in July with a positive reading of +0.6%.
  • North Korean and US tensions subsided further.

The Pound was a major loser after the CPI data release because inflation is such an important part of any Central Bankers decision making when it comes to raising interest rates and there have been two committee members in recent months that voted to raise the official cash rate at the Bank of England. Other committee members cited inflation as below where it needs to be for a rate increase and Tuesday’s official CPI reading backed up those comments. Any traders that were pricing in a rate increase at the BOE are now likely backing away from those positions and thus we saw a steep decline on the Pound following the CPI data release.

Whilst the US Dollar did rally on the back of better than expected July US Retail Sales figures, Retail Sales isn’t a data number that is going to sway the Fed’s view on whether or not to raise the official cash rate again this year. Positive Retail Sales figures can potentially boost inflation over time but it won’t have the same impact as a CPI inflation report that either beats or misses market expectations.

Looking ahead to today’s economic calendar and the AUD will need to get over a Wage Cost Index number at 11.30am. Wages growth in Australia has been virtually non-existent and if today’s reading is weaker than the market expects it could lead to the AUD being sold off further. In the European trading session, Italian and Euro Zone official 2nd quarter GDP numbers are listed as high impacting and should be reviewed for the results. Also released in the European session but listed as Medium impacting is the latest UK unemployment numbers and weekly earnings report. Keep in mind a data number may be listed as Medium impacting however if the data misses market estimates traders will react and buy or sell the currency. The US trading session sees the release of the US Fed’s July monthly minutes, which may provide some forward guidance on what the US Fed committee’s decision may be on interest rates in coming months.

 

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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