A Dose of Retail Therapy

Tuesday's rebound washed away Monday's market sorrow but a look at the two-day move is revealing. On the day, the pound led the way while the yen tumbled. The market will have a chance to digest the moves with a virtually empty Asia-Pacific calendar.  

Tuesday's trading was nearly a mirror image of the day before. Worries about a slumping US economy were the catalyst to start the week and a soft retail sales report might have cemented the concern. Instead, sales were slightly better than expectations although they were tempered by negative revisions. The slowing trend in sales is a minor concern but a decent report was all that was needed to sooth the fears and send the bears back into hibernation.

Initially, USD/JPY was reluctant to build on overnight gains but a strong open from stocks that led to a 1% gain sent the all-clear signal and the pair marched to 104.27 from Monday's low of 102.86. GBP/JPY erased the 300 pip decline the day before. All the while, EUR/USD was on the sidelines, virtually unmoved.

What's particularly interesting is that despite all the volatility, the main pairs are all virtually unchanged from Friday's close. EUR, CHF, JPY and USD have moved less than 10 pips while GBP is mildly lower. The moves at the margins were in the commodity currencies as AUD and CAD lagged while NZD soared ahead of the field.

One takeaway is underlying demand for the kiwi. In risk off and risk on environments, it climbed higher with ease. Meanwhile, the modest AUD hopes after Monday's rise above 0.9000 were dashed and the Canadian dollar languishes. With USD/CAD now within striking distance of 1.10, we struggle to see the case for a turnaround.