Intraday Market Thoughts

USD Consolidates, Big Day Ahead

by Adam Button
Sep 14, 2016 23:24

The US dollar gave back a portion of its recent gains on Wednesday while oil sank despite a bullish inventory report. The kiwi was the top performer while CAD and USD trailed. New Zealand GDP and Australian employment are up next. The Premium long in EURGBP was closed with 120-pip gain ahead of Thursday's UK retail sales and BoE decision before reconsidering entry. Then a big US data day on Thursday.

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USD Consolidates, Big Day Ahead - Oil Weekly Sep 14 2016 (Chart 1)

Economic data was light on Wednesday with US import prices at -0.2% vs -0.1% expected as the lone date point.

Oil inventories grabbed headlines and sent crude oil pop-and-drop. Stockpiles contracted by 559K barrels compared to 4000K expected. That's the second week in a row of drawdowns after last week's +14m surprise.

Like last week, which was skewed by Tropical Storm Hermine, oil initially rallied 80-cents but later reversed and finished near the lows at $43.65. USD/CAD was taken along for the ride as well as it did a lap between 1.3140 and 1.3200.

What prevented USD/CAD from rising higher was a broad-based US mini-slump. The euro climbed to 1.1270 from 1.1220 and cable recovered from a two-week low of 1.3135 to 1.3230 – a session high.

Overall, it was more a day of consolidation than any kind of trend. That will change in the day ahead starting with some key releases in Asia-Pacific trading, building to the BOE and then US retail sales.

Up first is Q2 New Zealand GDP at 2245 GMT. The consensus is for a 1.1% q/q rise and 3.6% y/y. New Zealand is one of the few bright spots in the global economy and those solid growth rates will underscore an RBNZ on the sidelines and the long-term potential for kiwi gains. In the short-term, however, risk related to poor market sentiment remain and many market participants believe the RBNZ will cut in November.

Next is Australian August employment at 0130 GMT. The Aussie was quiet in Wednesday trading in a 0.7450 to 0.7500 range. That range is highly likely to break on the jobs report. The consensus is for 15.0K new jobs and an unchanged unemployment rate at 5.7%. Look for a bounce back in full time jobs after a 45.4K decline last month.

The market is pricing in around a 35% chance of an RBA cut by year-end and this report will be one of the things that sets the stage for the tenure of new Governor Philip Lowe.

Act Exp Prev GMT
GDP (q/q)
1.1% 0.7% Sep 14 22:45
Core Retail Sales (m/m)
0.3% -0.3% Sep 15 12:30
Retail Sales (m/m)
-0.4% 1.4% Sep 15 8:30
Import Prices (m/m)
-0.2% -0.1% 0.1% Sep 14 12:30
Employment Change
15.2K 26.2K Sep 15 1:30

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