The Aussie Gets a Boost, as Focus Shifts to UK Retail Sales and the GBP

Earlier in the Day:

Economic data released through the Asian session this morning included June trade figures out of Japan and employment and business confidence numbers out of Australia.

For the Japanese Yen, June’s trade balance shifted from a ¥581bn deficit to a ¥721bn surplus, based on unadjusted figures, which was better than a forecasted narrowing to a ¥235bn deficit.

• Exports rise by 6.7%, year-on-year, falling short of a forecasted 7%, whilst also easing from Mays 8.1% rise.
• Imports increased by just 2.5%, falling well short of a forecasted 5.3% increase and May’s 14% surge.
• Following a trade deficit with the U.S in May, Japan’s trade balance moved back into a surplus with the U.S in June, with Japan’s deficit with China seeing a material narrowing in June, driven by a surge in exports.

The surplus with the U.S may raise Trump’s eyebrows, though for now the administration appears to be focused on China and the EU…

The Japanese Yen moved from ¥112.838 to ¥112.8 against the Dollar, upon release of the figures, before moving to ¥112.73 at the time of writing, up 0.12% for the session.

For the Aussie Dollar, it was an impressive set of numbers, with the ABS reporting:

• Employment change rose by 50.9k, coming in well ahead of a forecasted 18k increase, following an upwardly revised 13.5k rise in May.
• Full employment change surged by 41.2k in June, more than reversing a revised 19.9k fall in May, while part-time employment increased by 9.7K.
• While the unemployment rate held steady at 5.4%, which was in line with forecasts, the participation rate jumped from 65.5% to 65.7%, leading to the lowest unemployment rate in over 5-years.

For the NAB Quarterly Business Confidence numbers, the Index held steady at 7, with the impact muted as the markets responded to the positive labour market numbers that could ultimately provide the much needed pickup in wage growth that the RBA is in the need of to begin shifting on its policy stance.

The Aussie Dollar moved from $0.73987 to $0.74284 upon release of the figures, before easing to $0.7424 at the time of writing, a gain of 0.35% for the session.

In the equity markets, the ASX200 was on the move once more, gaining 0.38% at the time of writing to move into positive territory for the current week, with the Nikkei up 0.19% in spite of a stronger Yen, supported by the trade figures released earlier in the session, while the Hang Seng and CSI300 continued to languish in the red.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the European session to provide direction to the EUR, with the markets looking towards Capitol Hill for any retaliation to the EU’s roll out of tariffs on steel imports that has come in response to the U.S tariff on steel imports rolled out last month.

The U.S administration has singled out the EU’s auto sector as a possible target, with any moves to roll out tariffs a negative for the EUR, with little else in focus to provide support.

At the time of writing, the EUR was up 0.12% to $1.1651, with geo-political risk the key driver following some positive testimony from FED Chair Powell that pinned the EUR back to $1.16 levels mid-week.

For the Pound, it’s day 3 of the sequence that may ultimately bring an end to any chance of an August rate hike, Tuesday’s wage growth figures and Wednesday’s inflation numbers giving the BoE cause to sit back and focus on how the UK government is progressing on Brexit and what possible implications there may be for the UK economy.

Solid retail sales figures today, which will likely come off the back of the 2018 Football World Cup and a summer heat wave, may not be enough to keep the BoE on track, easing inflationary pressures and doubts over whether there is momentum in domestic consumption possible reasons to soften the impact of the numbers, though few will argue against the fact that the UK economy has recovered from the woes of the 1^st quarter, which leaves some hope for the BoE hawks.

At the time of writing, the Pound was up 0.08% to $1.3080, with today’s data the key driver.

Across the Pond, economic data out of the U.S includes the weekly jobless claims figures along with July’s Philly FED manufacturing Index, which is forecasted to provide the Dollar a boost, anything in line with or better than forecasts affirming FED Chair Powell’s view on the U.S economy, whilst also easing any immediate concerns of a negative impact of a trade war on the U.S economy.

At the time of writing, the Dollar Spot Index was down 0.06% to 95.028, with direction through the day hinged on today’s stats and any noise from the Oval Office, trade continuing to be an area of focus for the markets.

For the Loonie, it’s a quiet day on the data front, with direction through the day likely to come from the Oval office ahead of tomorrow’s inflation and retail sales figures that could raise the prospects of a near-term rate hike, the BoC governor having already discounted the near-term impact of trade tariffs on monetary policy.

At the time of writing, the Loonie was up 0.02% to C$1.3167 against the U.S Dollar.