Dollar Needs Good US Data

Market Drivers October 13, 2017
Cable heads higher
China Trade Balance misses
Nikkei 0.98% Dax 0.02%
Oil $51/bbl
Gold $1294/oz.

Europe and Asia:
CNY Trade Balance 28 vs, 38

North America:
USD CPI 8:30
USD Retail Sales 8:30

The pound continued its merry ways, while euro was weighed heavy by decline in Bund yields and USDJPY dipped below the 112.00 level in free-for-all Friday in Asian and early European trade.

The only major economic event of the night came from China where the Trade Balance missed its mark coming in at 28B vs 38B but it had little impact on trade. The miss was due to larger than anticipated rise in imports which climbed by 18%, but exports also rose to 8% indicating that global growth remains on pace.

Cable continued to find buyers after yesterday’s suggestion that EZ officials were open to extending UK stay in the union for 2 more years past the 2019 deadline. Sentiment has shifted towards the pair and some analysts are now suggesting the possibility of a 2nd referendum – which seems unlikely to us given the current political environment. Still, it appears clear that both parties are trying to work towards some sort of a soft Brexit and that is being received positively by the market for now.

In North America, the focus will turn towards CPI and Retail Sales data. Both numbers are expected to rise and could provide much-needed boost to the dollar. Disinflation and growth are the two primary concerns for the Fed and if today;s data can show that US economy is conclusively overcoming these issue the prospect of not only the rate hike in December but the general path of monetary policy will become much clearer.

USDJPY dropped below the 112.00 in afternoon Asia trade, but could turn around on positive US data. If however, the news proves negative the key 111.50 support is sure to be tested as the day proceeds.