Sterling stole the limelight this morning, being pummelled by worse than expected economic data. The CHF has rallied on comments from the SNB that it does not have a specific intervention level for the CHF. The AUD attempted to push higher overnight aided by higher oil prices and a strong business confidence indicator. However, AUD/USD was unable to hold above 0.800 and has subsequently moved back below its 0.7950 pivot. Price action in EUR/USD has been subdued during London hours. While USD bulls have been subdued by a dose of realism about the strength of the economic 'green shoots', the EUR is vulnerable on fears over the amount of bad loans mounting up in the Eurozone banking sector , leaving little net direction in EUR/USD.
UK retail sales fell -0.6% m/m in May far weaker than the +0.3% market median. Insofar as the market has become accustomed to stronger than expected numbers on the UK economy over the past month or so, these data served as a reminder that the economy has a long way to go before recovery is firmly established. Also bringing bad news was the UK May public finances data. The PSNCR rose to GBP 18.8 bln. This will serve as another warning on the deteriorated position of the budget deficit in the UK and the need for austerity going forward to preserve the outlook for government debt. The release of CBI industrial trends survey showing an improvement in confidence in the sector has helped stabilise the pound. EUR/GBP pushed up to 0.86 before finding buyers. Cable met with resistance at 1.6480.
As expected the SNB kept its interest rates target unchanged this morning at 0.25%, it also reiterated that it will counter any CHF gains vs the EUR. The CHF strengthened, however, as policymaker Jordon admitted that the SNB does not have a specific intervention target for the CHF. This had the effect of calming market fears over the imminence of intervention. EUR/CHF found support around the 1.5015/20 level.
USD/CAD has stayed close to its closing level ahead of this afternoon's Canadian May CPI data. The USD is cautious ahead of the release of the June Philly Fed survey and May leading indicators. US initial claims data are also due.
