Forex Forecast

Merkel Fills Her Diary As politicians return from their summer vacations, German Chancellor Angela Merkel wasted no time in arranging another leaders meeting with French President Hollande for talks and dinner on Aug. 23.

Yen Steadies The sell-off of US Treasury securities finally came to a halt overnight, preventing USDJPY from advancing any further. Crucially, the 10y yield has yet to break above 1.86% and so the yen may find a near-term foothold at these levels – at least until next week’s FOMC minutes.

Risk Currencies Gain Risk assets have advanced despite mixed US data. Housing starts in July fell to 746k from a downward-revised 754k the previous month, while the August Philly Fed index improved to -7.1 from -12.9 and jobless claims were up by 2k.

Firm UK Retail Sales The UK did its bit in alleviating growth fears overnight as retail sales also came in better than expected. However, the focus will inevitably on whether the US can continue its recent good run of form and pressure more short-term names to drop their Treasury holdings as the wider macro environment […]

Yen Still Vulnerable US Treasury yields nudged higher again overnight, giving USDJPY another upward push. Although yesterday’s headline CPI in the US was on the soft side of consensus, industrial production marginally beat expectations and the housing market index climbed to levels unseen since 2007.

A Softer EUR The US overall CPI came in flat m/m in July against a consensus estimate of 0.2%, as food prices moderated and energy prices dropped.

No Discussion of BoE Rate Cut The pound pushed higher after the monthly BoE Minutes revealed a unanimous decision on QE/bank rate, but crucially, no discussion of rate cut.

Stronger Australian Wages Australian wage growth accelerated to +3.7% y/y (cons. 3.5%) in Q2, which supports the view of our Australian economics team that the RBA are likely to remain on hold for the foreseeable future.

Yen Retreats JPY lost ground against its peers as positive data surprises in the US and Eurozone strengthened risk appetite. US retail sales grew by 0.8% m/m in July, the first gain in four months, beating expectations of a 0.3% increase.

UK CPI Ticks Higher Following the news that the German constitutional court has been asked to refer the ESM treaty to the European Court of Justice, Reuters quoted a spokesperson from the constitutional court as saying that it sees no reason to delay the Sept 12 verdict, removing any fears that the process may be […]

Eurozone GDP Due BoJ minutes, New Zealand retail sales, and Australian business confidence data were released overnight but all failed to generate a significant market reaction. A deluge of economic data due later today could inject more life into FX markets however.