Canadian Retail sales drop unexpectedly
US Fed in dovish tone
Sterling awaits first substantial UK data of the week
Merkel not worried about ‘Grexit’
FX Market Overview
Poor Prince Harry. All he wants to do is have fun, play strip billiards, get hammered and gad about in his birthday suit and he can’t even do that without someone publishing pictures. Although I loved the courtesy of one of the guys on holiday from Essex who found himself swept along in the Prince’s entourage. He refused to comment on what happened because the Prince was ‘such a lovely bloke’. It’s a shame his friends didn’t follow that lead.
But while the Prince was ‘cavorting’ or ‘romping’ as the tabloids like to put it, the other highlight of the day was the release of the minutes from the last US Federal Reserve Open Market Committee meeting. Clothing was required at that event and as had been expected, the tone of the meeting was very dovish with a downgrade of growth forecasts and an expectation that the unemployment rate would remain well above their estimate for a natural balance. There was no evidence or a plan to reduce the amount of excess Fed funds wafting around the US economy and we may even see further funds added but there was no firm commitment to that at this stage. Naturally, the US Dollar weakened on the news and the value of US Treasuries rose.
The Euro had a good rally overnight, especially against the US Dollar after the Fed meeting minutes were published. Today brings a smattering or Purchasing Managers Indices from the Germany and the whole Eurozone which ought to point to further contraction although a report on German GDP released this morning showed 0.3% growth in Q2 and a strong showing on the consumer front. That was a little more positive than had been expected and anything released today will be seen against that back-light. The Euro appears to have been helped by comments from Angela Merkel that she doesn’t think a Greek exit from the Euro would have much impact because it is so widely expected. Whatever happened to the ‘there is no plan B’ mantra that has been rolled out ad infinitum over the last 12 years?
Sterling has had a couple of lacklustre days with little data to excite traders and few traders at their desks to get excited. That changes today with the release of lending data from the British Bankers Association and the retail part of the Confederation of British Industry’s data. An upturn in retail activity is expected but the lending data is likely to be rather less encouraging. Banks aren’t lending unless you don’t need the money and the public are paying down debt rather than adding to it unless they have to. Things get even more lively tomorrow morning when we get the 2nd set of calculations of British economic growth for the April to June period. We are expecting the initial 0.7% quarterly contraction to be revised to a less painful but still negative 0.5% contraction. That will be seen as appositive and Sterling is likely to end the week with a spring in its step if the data meets that expectation.
The Canadian Dollar, which had been very bullish of late, was knocked yesterday by a surprise drop of 0.4% on the month in retail sales. That was contrary to market forecasts of 0.1% growth and served to highlight the flaky nature of growth in all economies. There is a feeling that Canadian’s were popping across the border to buy at cheaper prices in America as the exchange rate has been in their favour of late. Canada’s economic growth data is due out next Friday and analysts are starting to believe the figure will be a poor one. The Canadian Dollar may well weaken as we head towards that number through the next few days of trading.
And finally, proof that leopards don’t change their spots. Warders at a French jail where inmates were allowed to grow their own produce and herbs were amazed to find a cannabis plant growing in the vegetable patch. The quote offered to the press has a lovely innocence about it; Christophe Beaulieu from the prison officers' union, said, "When you don't know what you are looking for it is easy to confuse them with other plants".
I like Vegas for its spontaneity.