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Risk-On, Risk-Off Theme Continues

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USD

The US dollar came back stronger at the beginning of this week owing to upbeat remarks from William C. Dudley, a Federal Reserve official and also on the back of the positive close for equities.

On Tuesday, the Greenback was mostly stable vs. a basket of major currencies following overnight gains, as investors continued to digest Friday’s U.S. inflation data and as geopolitical tensions between Washington and Pyongyang have eased.

  • The U.S. dollar index (DXY), which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.06%, to settle at 93.49 pips.

The focus today will be on Tuesday's U.S. retail sales report for July, which measures the total receipts at stores that sell durable and nondurable goods, is forecast to increase 0.2% m/m.  Traders should watch this closely as it could offer more insight into the prospect of additional monetary tightening later this year as well as the central bank’s plan to cut its $4.5 trillion balance sheet.

EUR

The common currency edged lower yesterday after downbeat industrial production data. The report highlighted a 0.6% drop against a predicted 0.4%. German preliminary GDP is due next with a 0.7% growth figure eyed. Italian and French banks are closed today.

JPY

The yen lost ground against most of it’s competitors as risk-taking has taken hold again. Japan’s revised industrial production on the tap today but no revisions to the predicted 1.6% is eyed. Market sentiment will most likely determine the direction the yen pairs.

GBP

Sterling edged up to 1.1032 against the euro and fell as much as 0.07% vs. USD with GBP/USD 1.2956 as traders are awaiting key updates on the UK economy.

On the economic calendar for Tuesday, the UK Core Consumer Price Index, which measures the change in prices for retail goods and services, including food and gas, is expected to rise at an annual rate of 2.7% in July, up from 2.6% in June.

Markets are awaiting UK Employment figures due later in the week as it could give another insight into the economy and signal when the Bank of England will hike rates. If policymakers are likely to raise interest rates, the Sterling pound is likely to strengthen vs. the single currency and the Greenback. On the inflation front, UK Policymakers are trying to keep inflation running at around 2%.  

Gold

Earlier today, Gold prices went down as risk appetite declined, after tensions eased between Washington and Pyongyang, following remarks from U.S. officials reducing the possibility of war on the Korean peninsula. Overnight, Gold prices eased from two-month highs, as investors are looking for more riskier equities.

Gold Futures - Dec 17 (GCZ7), fell as much as 0.71%, to settle at $1,281.24, while Spot gold was down 0.5%, to settle at $1,275.79.  

Oil

Oil prices hit three weeks low yesterday negatively affected by a strong U.S. dollar, as and worrying signs of lower demand. On the release front, the EIA said the U.S. shale oil production is expected to see a climb of 117,000 barrels a day in September to 6.149 million barrels a day. 

Crude Oil WTI Futures - Sep 17 (CLU7), rose as much as 0.06%, to settle at $47.62, while Brent Oil Futures - Oct 17 were up 0.16% to settle at 50.80. That was just above their 100-day moving average, briefly touched in the previous session.

The most important economic events:

  • EUR German Gross Domestic Product w.d.a. (YoY) (2Q P): (GMT 06:00) – Important – Forecast (1.9%) – Previous (1.7%).
  • EUR German Gross Domestic Product n.s.a. (YoY) (2Q P): (GMT 06:00) – Important – Forecast (0.6%) – Previous (2.9%).
  • GBP Consumer Price Index (YoY) (JUL): (GMT 08:30) – Important – Forecast (2.7%) – Previous (2.6%).
  • GBP Core Consumer Price Index (YoY) (JUL): (GMT 08:30) – Important – Forecast (2.5%) – Previous (2.4%).
  • USD Advance Retail Sales (JUL): (GMT 12:30) – Important – Forecast (0.4%) – Previous (-0.2%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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