UK Retail Sales, Eurozone Inflation and ECB Meeting Minutes to Drive the EUR and the GBP

Unsurprisingly, the FOMC meeting minutes released late in the U.S session on Wednesday failed to deliver on market expectations, with there being no timelines on when the FED will begin selling down the balance sheet, as the markets further priced out the chances of a 3^rd and final rate hike of the year by year end, FOMC members continuing to raise concerns over soft inflation.

It had been a good start to the week for the Dollar, but as had been the case with the FOMC statement, the minutes were Dollar negative and so was the U.S President, with news of two business panels being disbanded as a result of CEOs walking out in protest over Trump’s position on riots in Virginia, adding to the already negative sentiment.

There seems to be little hope for the Dollar at present, with any attempts of a Dollar rally seemingly thwarted on each occasion, the only near-term upside likely once the FED begins selling down the balance sheet and also starts talking of a need to move on rates, irrespective of soft inflation. Perhaps with Trump at the helm, there is an opportunity for the FED to build in more of a buffer on rates, with Trump more than capable of pegging back the Dollar, as has been the case through the first half of the year.

For the day ahead, macroeconomic data out of the U.S includes industrial production figures for July, August’s Philly FED Manufacturing PMI and the weekly jobless claims numbers.

If the NY Empire State manufacturing figures were anything to go by, a sharp pickup would certainly be Dollar positive, though the markets will want to see the weekly claims data hold steady.

It’s not going to be all about the Dollar today, with the markets also looking at key data out of Europe.

Across the Pond, July retail sales numbers out of the UK will be key for the Pound, which managed to recover to $1.29 levels off the back of the Dollar stumble late on Wednesday, though we don’t expect any major upside in the Pound over the near-term, with today’s figures forecasted to be on the softer side and a negative.

From the Eurozone, finalized July inflation numbers are scheduled for release alongside July’s trade figures, which are forecasted to be EUR positive, though core inflation is going to continue to sit well short of the ECB’s objective, holding back any prospects of a near-term shift in monetary policy. The EUR will be looking to recapture $1.18 levels should the figures be in line with or better than forecast and with the Dollar under so much pressure

The ECB had managed to find a way to peg back the EUR, stating that Draghi would not be discussing monetary policy at the Jackson Hole meetings, the result being a EUR tumble on Tuesday.

Where things sit by the end of the week remains to be seen, but for the day ahead, it’s going to be between the Dollar and the EUR, with the ECB minutes also scheduled for release this afternoon, though with the recent run in the EUR, there’s unlikely to be anything too hawkish in there to stir the pot.

At the time of the report, the Dollar Spot Index was down 0.05% at 93.494, recovering from an Asian session low of 93.312, with the EUR and the Pound both down 0.03% at $1.1764 and $1.2887 respectively.