ECB Policy Meeting Minutes to Drive the EUR, with the Dollar on the Bounce

Earlier in the Day:

Economic data released through the Asian session this morning was particularly light, with material stats limited to Australia’s November retail sales figures.

Sales surged by 1.2% in November, which was the largest increase since early 2013, with the increase being attributed to a 9.3% bounce in the sale of electrical and electronic goods.

Other notable increase included a 2.2% increase in other retailing industries and in clothing retail and a 1.8% increase in hardware, building and garden supplies retailing.

According to the Australian Bureau of Statistics, the surge in electrical and electronic goods sales was attributed to the release of the iPhone X and from November promotions, including Black Friday sales.

The Aussie Dollar moved from $0.78394 to $0.78672 upon release of the data, with the November numbers coming at a difficult time for Australian households, where household debt growth continues to outpace wage growth. Recent employment figures have been upbeat, but until wage growth begins to accelerate, retail sales will remain at risk.

For the Yen, there was some easing in appetite for the safe haven, with the Yen down 0.29% to ¥111.76 against the Dollar at the time of writing. The losses came in spite of appetite for riskier assets being mixed through the session, with rising government bond yields having weighed on the equity markets.

The ASX200 closed out the day down 0.48%, erasing most of the gains made from the first week of the year, with the Nikkei ending the day down 0.33%. For the CSI300 and Hang Seng it was a mixed start to the day, with the Hang Seng moving in and out of the red, while the CSI300 managed to recover from heavy losses at the start of the session to just a 0.07% loss at the time of writing. A 2.27% slide in Tencent Holdings certainly pegged back the Hang Seng, with the Hang Seng’s largest weighted stock having closed out at a record high on Wednesday.

The Day Ahead:

For the EUR, the markets will be looking ahead to the ECB monetary policy meeting minutes that are scheduled for release this afternoon. With the tapering to the asset purchasing program is now in progress, the markets will be looking for any talk of a shift in policy towards interest and deposit rates, with news of a possible end to the asset purchasing program post September of this year also a factor to consider.

Any chatter on interest and deposit rates could see the EUR bounce back to high $1.20 levels later today. At the time of writing, the EUR was down 0.04% to $1.1943, with the Eurozone’s industrial production figures due out later this morning forecasted to provide some support to the EUR ahead of the minutes release.

Following Thursday’s stats out of the UK that left the Pound struggling for direction, there are no material stats out of the UK this morning, with a bounce back in the Dollar ahead of the European open weighing on Sterling, with Brexit back in focus.

At the time of writing, the Pound was down 0.10% to $1.3493, with Brexit chatter the key consideration through the day.

Across the Pond, the Dollar Spot Index managed to shake off losses from early in the Asian session, rising 0.12% to 92.445 at the time of writing. Market sentiment towards the Dollar has been mixed, with news of China’s plans to pull back on purchasing U.S Treasuries overshadowing some hawkish FOMC member commentary from earlier in the week. Concerns were quashed however, with the Chinese government denying that it was looking to pull back on purchases, providing the Dollar with much needed support this morning.

On the data front, stats out of the U.S are limited to the weekly jobless claims figures, together with wholesale price inflation numbers that are not forecasted to be particularly bullish for the Dollar ahead of tomorrow’s retail sales and consumer price numbers.

While the stats may be on the negative side for the Dollar, FOMC voting member Dudley is also scheduled to speak later in the day, with any hawkish commentary likely to offset any data driven softness in the Dollar.

For now, the markets remain relatively dovish on the outlook for U.S rate hikes through the year, but if Dudley joins Mester and Williams in support of at least 3 hikes this year, the pendulum may begin to swing in favour of the hawks.