DAILY US OPENING NEWS: Choppy GBP following mixed retail sales data, while EUR eyes 1.17 ahead of ECB minutes

17th August 2017

ASIA-PACIFIC

Asia equity markets traded indecisive following a relatively tepid close in the US where basic materials outperformed as zinc rose above USD 3000/ton to a decade high, while energy and financials declined on oil weakness and after US yields were pressured post-FOMC minutes. ASX 200 (-0.10%) was choppy with miners underpinned by strength across the metals complex and as a slew of earnings releases also drove individual stocks, while Nikkei 225 (-0.14%)was subdued by a firmer currency. Shanghai Comp (+0.68%) and Hang Seng (-0.24%) were both initially higher, although the latter then pared gains on profit taking and amid an increase in money market rates. 10yr JGBs traded flat amid an indecisive risk tone in Japan, while the 5yr auction also failed to spur price action as the results were mixed.

PBoC injected CNY 60bln in 7-day reverse repos and CNY 40bln in 14-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.6709 (Prev. 6.6779)

Japanese Trade Balance (Jul) JPY 418.8bln vs. Exp. JPY 327.1bln (Prev. JPY 439.9bln). (Newswires)
- Exports (Jul) Y/Y 13.4% vs. Exp. 13.2% (Prev. 9.7%)
- Imports (Jul) Y/Y 16.3% vs. Exp. 17.0% (Prev. 15.5%)

 

EUROPE/UK

UK government reportedly to allow EU migrants through Irish border into the UK post-Brexit, with government position paper suggesting the government will preserve the common travel area between Northern Ireland and the Republic of Ireland. (Newswires)

The next phase of Brexit talks is likely to be delayed until December, according to sources. (Sky News)

Britain’s exit from the European Union will result in a worse customs deal than it has now, according to the Institute for Government. (Newswires)

 

EQUITIES

European equities trade modestly lower (Eurostoxx 50 -0.3%) with financials underperforming in the wake of yesterday’s FOMC minutes which received a somewhat dovish response given concerns at the Fed regarding inflation. To the upside, material names outperform in response to the gains seen overnight in the metals complex with Dalian iron ore prices up over 6% during Asia-Pac trade.

 

FIXED INCOME

In fixed income markets, prices were originally supported by the softness seen in European equities and the fallout of yesterday’s FOMC minutes with the 10yr Bund approaching 164.00 to the upside. Looking ahead, investors will likely turn towards today’s ECB minutes release for any views on concerns surrounding scarcity of core paper and any potential biases the central bank could have in purchasing paper from across the continent.

 

FX

GBP was once again a key focus for FX markets amid further tier 1 data from the region, this time with retail sales on the data slate. Upon the release, GBP/USD saw a spike higher after ¾ headline metrics exceeded expectations before prices were dragged lower to pre-announced levels with all 4 components revised lower.

USD has regained some ground against its major counterparts following the losses seen last night in the wake of the FOMC minutes. USD has particularly out-muscled EUR with participants looking for further insight via the ECB minutes into the current train of thought at the central bank given yesterday’s source reports.

AUD has regained some ground amid firmer metals prices, subsequently shrugging off the domestic jobs data overnight.


UK Retail Sales MM (Jul) 0.3% vs. Exp. 0.2% (Prev. 0.6%, Rev. 0.3%)
- Retail Sales YY (Jul) 1.3% vs. Exp. 1.4% (Prev. 2.9%, Rev. 2.8%)
- Retail Sales Ex-Fuel YY (Jul) 1.5% vs. Exp. 1.3% (Prev. 3.0%, Rev. 2.8%)
- Retail Sales Ex-Fuel MM (Jul) 0.5% vs. Exp. 0.2% (Prev. 0.9%, Rev. 0.6%)


Eurozone Inflation Final MM (Jul) -0.5% vs. Exp. -0.5% (Prev. 0.0%)
- Inflation, Final YY (Jul) 1.3% vs. Exp. 1.3% (Prev. 1.3%)
- Infl Ex Food & Energy YY (Jul) 1.3% vs. Exp. 1.2% (Prev. 1.2%)
- Infl Ex Food & Energy MM (Jul) -0.5% vs. Exp. -0.5% (Prev. 0.2%)

 

COMMODITIES

The metals complex traded higher overnight with gold prices extending on gains seen following the FOMC minutes. Elsewhere, Copper traded higher alongside broad strength across basic materials with Dalian iron ore prices up nearly 6%, while WTI traded quiet overnight and failed to make any significant recovery from yesterday’s post-DoE declines.

Saudi Arabia June output rose 190K bpd M/M to 10.07mln bpd, while Saudi Arabia June crude exports fell 40K bpd M/M to 6.889mln bpd, according to JODI data. (Newswires)

Libya's NOC said that the Sharara oil field is "working normally and the situation is currently stable" following recent security breaches. (Newswires)

17 Aug 2017 - 11:17- Research Sheet- Source: RANsquawk

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