mask A Big Day ahead for the Dollar and the Pound

15/ 11/ 2017

A Big Day ahead for the Dollar and the Pound

Daily Update - 15th November 2017

Yesterday’s Focus

•             EUR Gross Domestic Product & Industrial Production & President Draghi Speech

•             GBP BOE Governor Mark Carney Speech, Consumer Price Index & Producer Price Index - Output

•             USD Janet Yellen Speech & Producer Price Index

Yesterday’s Explained

There continue to be two themes that are driving market prices. The first is central banks sentiment. The ECB’s Draghi says that forward guidance now full policy instrument. Draghi said at a central banker meeting that the forward guidance has proved to be successful and has now evolved into a “full-fledged monetary policy instrument”. BoE’s Carney meanwhile stressed that different channels are needed to communicate successfully, while Fed’s Yellen stressed that central bank guidance should be conditional on the outlook and that for the Fed the appropriate path depends on expectations about what the medium-term outlook is so that the Fed’s expectations for appropriate policy evolves over time in line with the outlook. What we can gather from these comments is that we need to keenly watch was central bankers are saying as well as what they are doing.

 

From Europe, the euro rose to a 2-1/2 week high against the greenback on Tuesday after release upbeat German GDP data and in-line EU GDP quarterly data which surpassed growth in the U.S. economy. First in the raw of the news is the German GDP that rose 0.8% q/q in Q3 after rising 0.6% in the previous quarter. Over the year, German GDP rose 2.3% y/y. The Eurozone Q3 GDP rose 0.6% q/q and 2.5% y/y in Q3, adding to the rosy picture of Eurozone's booming economy. From UK, The British pound remained on the back foot on Tuesday's session. Despite briefly rising to 1.3129 at Asian open, cable came under selling pressure and fell to sessions lows at 1.3075 in European morning after soft U.K. inflation data. However, price erased intra-day losses and later rallied to session highs of 1.3186 in New York afternoon due to broad-based usd's weakness. From US, even despite US producer  prices rose by more-than expected in October, with the index up to 0.4% monthly basis, The PPI rose 2.8%, the largest increase in almost six years. The uptick in inflation at factory levels did little for the USD, as the dollar is being dumped on uncertainty surrounding the US tax reform.

 

Today’s Focus

•             EUR Trade Balance

•             USD Retail Sales & Consumer Price Index

Today’s Market

The day starts with Europe releasing their trade balance data. The Trade Balance released by the Eurostat is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the EUR.

Later in the day, from US, The retail Sales released by the US Census Bureau. This measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. This is followed by The Consumer Price Index released by the US Bureau of Labor Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends.