UK Inflation and U.S Retail Sales Put the GBP and USD in Focus

Earlier in the Day:

Economic data released through the Asian session this morning was on the lighter side, with key stats limited to August consumer sentiment figures and 2^nd quarter wage growth numbers out of Australia.

For the Aussie Dollar,

The Westpac consumer sentiment index fell by 2.3% to 103.6 in August, partially reversing July’s 3.9% rise to 106.1.

• In spite of the decline, the index continues to sit in positive territory and 5.5% above the average in 2014 to 2017.
• Tax cuts and a dovish RBA contributed to the upward trend in the index in June and July, with just shy of 50% of those surveyed for the August report fearing a rate hike, down from 61% in Aug-17 and 58% in Feb-18.
• The biggest declines in the sub-indexes were recorded in:
  • Economic outlook over next 12-months, which fell by 4.9%.
  • Economic outlook over next 5-years, which fell by 3.1%.
• Less material declines were seen in:
  • Finances vs a year ago slipped by 0.5%.
  • Finances next 12-months fell by 1.1%
  • Time to buy a major household item fell by 1.7%
  • The Unemployment Expectations Index rose by 2.8%
• Providing support were:
  • Time to buy a dwelling rose by 5.5%.
  • Consumer expectations for house prices rose by 0.3%, following a 13.1% over the two previous months.

The Aussie Dollar moved from $0.72314 to $0.72286 upon release of the figures, which were released ahead of the 2^nd quarter wage growth figures.

Wages rose by 0.6% in the 2^nd quarter, which was in line with forecasts, while coming in ahead of a 0.5% rise in the 1^st quarter.

• Wholesale trade, Construction and Healthcare and Social Assistance industries were the main contributors to the rise in wage growth in the 2^nd quarter, according to the ABS.
• In the private sector, retail trade, accommodation and food services, arts and recreation services and other services all recorded the lowest growth in the 2^nd
• Rises through the year in the private sector ranged from 1.3% for mining to 2.8% for education and training.
• Rises through the year in the public sector ranged from 1.8% for profession, scientific and technical services to 2.6% for healthcare and social assistance.

The Aussie Dollar moved from $0.72294 to $0.72265 upon release of the figures before rising to $0.7234 at the time of writing, down 0.12% for the session.

Elsewhere, the Japanese Yen was down 0.17% to ¥111.34 at the time of writing, with the Kiwi Dollar down 0.12% to $0.6564, the downward slide in the Kiwi resuming.

In the equity markets, it was a mixed start to the day, with the Hang Seng sliding 0.81% and the Nikkei and CSI300 down 0.31% and 0.29% respectively, while the ASX200 recovered from early losses to move into positive territory at the time of writing.

The Day Ahead:

For the EUR, there are no material stats scheduled for release through the morning to provide direction, leaving the EUR in the hands of contagion risks from Turkey and the U.S – China trade war, with Tuesday’s stat out of Germany and the Eurozone having provided limited support on the day.

At the time of writing, the EUR was down 0.03% to $1.1341, with a steadier Turkish Lira having provided little relief to concerns over contagion risk to the Eurozone economy. Direction through the day will continue to be hinged on market sentiment towards the Turkish economy and the ongoing trade spat between the U.S and China.

For the Pound, it’s yet another big day ahead, with key stats scheduled for release out of the UK including July inflation figures.

Following the most recent BoE press conference and general sentiment towards Brexit, a pickup in the annual rate of inflation could reignite talks of another BoE rate hike before the end of the year, though the lack of progress on Brexit may leave any Pound rally on hold near-term as a no deal scenario continues to be a possible outcome.

Tuesday’s softer wage growth figures would have certainly swung the pendulum in favour of the doves.

At the time of writing, the Pound was down 0.06% to $1.2716, with today’s stats and Brexit chatter the key drivers through the day.

Across the Pond, stats are on the heavier side, with key stats through the day including July retail sales and industrial production figures, 2^nd quarter nonfarm productivity and unit labour cost numbers and June business inventory numbers.

Of less influence will be the release of August NY Empire State manufacturing numbers, with the Dollar expected to be more susceptible to the downside, the markets ever watchful for any evidence of a slowdown to the U.S economy stemming from the ongoing trade war.

At the time of writing, the Dollar Spot Index was down 0.02% to 96.716, with today’s retail sales figures likely to be the key driver, though the markets will need to keep an eye on the Oval Office, the U.S President more than capable of rocking the boat.

For the Loonie, it’s another quiet day on the data front, with little to provide direction through the day except any updates on the timetable for NAFTA negotiations and possible rhetoric from the Oval Office to get the mood right ahead of meeting at the negotiating table.

At the time of writing, the Loonie down up 0.02% to C$1.3061.