Seesaw markets have dominated the last twenty four hours as investors seek direction in an otherwise desolate August existence. Yesterday morning the US dollar experienced a very short-lived sell-off following July retail sales that missed the mark, showing no growth against expectations of +0.2%. This was just enough as the markets were looking for any excuse to throw water on this most recent dollar rally as French and German inflation numbers disappointed overnight Wednesday. This morning we find EURUSD once again putting 2014 lows to test after France and Germany posted disappointing numbers for the second day, this time in the form of Q2 GDP. Sterling has been the big loser of late as it continues its prolonged slide after touching its highest level against the dollar since 2009.
Global equity markets are mostly higher this morning as things remained calm in Asia and Europe. The Bank of Korea cut its base rate to 2.25% from 2.50% – as expected – and Japanese machinery orders for the month of June were mostly a mixed bag. What did cause a stir leading to a jolt in equity prices was a report that PM Abe in Japan would be unleashing an array of stimulus measures after a temporary slowdown caused by the most recent sales tax hike. The JPY is sliding against most major currencies as the Nikkei closed the session over 100 points higher. With more indications that a Chinese slowdown is imminent, it will be interesting to watch neighboring Asian nations take steps to free up cash, promote investment and generate growth in precaution.
This morning we saw mostly second tier data out of the US and Canada. The Canadian New Housing Price Index was released at 8:30am and showed a modest rise over last month but is still down 1.5% from this point in 2013. Weekly jobless claims in the US were also released at 8:30am as the report indicated a rise over last week, with +311k in new claims. There is a good chance range bound markets persist into the weekend as most geopolitical stand-offs remain just that – stand-offs. A new cease-fire has commenced in the Gaza Strip as talks resume between Israelis and Palestinians in Cairo. It has also been a quiet week in Ukraine as Russian stocks climbed for a fifth day today following comments from Russian President Putin that his country “will do all it can to stop the conflict.” Finally, it would appear that this Iraq War isn’t enough to generate interest as the US continues to conduct targeted airstrikes in Northern Iraq on the ISIS terrorists seeking control of that region.
Looking out to tomorrow, we get US inflation numbers for the month of July and the UK will report second quarter growth overnight. Canadian manufacturing sales for June closes out the week as traders inch ever closer to the end of the summer.
Further reading:
USD/JPY: Trading the UoM Consumer Sentiment Index
EUR/USD Aug. 14 – Euro Gains Ground Despite Sluggish GDP Data
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