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Euro hits new 8-year high

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USD

On Wednesday, the Greenback managed to recover from a 2-1/2-year low, and pared losses against a basket of currencies as worries about North Korea’s firing of a missile over Japan eased.

On the release front, the Consumer Confidence Index went against expectations and rose to a five-month high in August to 122.9. The Consumer Confidence Index beat expectations last month as well.

Despite concerns about continued low inflation, bullish consumer optimism together with the tightening labor market, may help persuade the Federal Reserve to hike interest rates before the end of the year.  Meanwhile, investors are now focusing on the U.S. non-farm payrolls data for August, which is the most important U.S. economic report of the month that comes out Friday morning.

On the economic calendar for Wednesday, traders are awaiting the U.S. Gross Domestic Product (q2), which is expected to rise to 2.7% from 2.6%. This is in addition to the ADP report, which is seen as a precursor to Friday’s official NFP data and the first revision of Q2 growth figures. 

EUR

The common currency was able to benefit from concerns over Brexit to strike a fresh eight-year high against its British counterpart yesterday. Rattled investors in search of a safe haven also gave the euro yet another boost, with the pound dropping to 1.0745, the lowest since October 2009.

Against the greenback, the single currency rose as much as 0.1% to 1.1981, having retreated from Tuesday's high of 1.2070, the highest level since January 2015. The euro has risen steadily over the past year against most major currencies to reach levels not seen since September 2014.

On the release front, traders are awaiting German Consumer Price Index, which is the most popular way to measure changes in purchasing power, is expected to hit 1.8% from 1.7%. German and Spanish flash CPI readings are also due.

GBP

The Sterling was the weakest of the majors yesterday with Brexit talks not going in favor of the United Kingdom’s panel. In addition, data came out also weaker than predicted with Nationwide reporting a 0.1% drop in house prices against a projected unchanged reading. Net lending to individuals and mortgage data and the BRC price index are due today.

JPY

The Japanese currency had rallied with risk aversion in play after the North Korean missile launch news but returned to its previous level shortly thereafter when markets calmed down. On the economic data front, Japanese household spending declined to 0.2% against a predicted gain of 0.8%. Today, the retail sales report is due with a decrease to 1.1% from 2.2% forecast.

Gold

Earlier today, Gold prices pared its gains and drifted further away from a nine-month high hit in the previous session, as the Greenback recovered from multi-year lows on easing worries surrounding North Korea.

The precious metal, which is considered a good store of value during volatility in other markets, traded above the psychological level of $1,300 before reversing course to decline by 0.04% to $1,307.01. Despite the decline, gold has managed to stay above the $1,300 level as traders remained watchful ahead of today's important economic data from the US.

Spot gold inched down by -0.19%, to settle at $1,306.10, while Gold Futures - Dec 17 fell as much as 0.53%, to settle at 1,311.98.

Oil

Oil prices fell on Wednesday, however, gasoline prices jumped to its highest since mid-2015 as hurricane Harvey's impact continued to dominate oil prices. The US’ largest refinery, Motiva Enterprises' 603k barrel-per-day plant in Port Arthur, Texas, shutdown yesterday night due to flooding. According to Goldman Sachs, almost 3 million barrels of oil a day can't be refined into gasoline and other products about 16% of U.S. refining capacity.

Brent crude futures fell as much as -0.08%, to settle at $51.62, while Crude Oil WTI settled at $ 46.30, down by -0.30%.

The most important economic events:

  • GBP Net Consumer Credit (JUL): (GMT 12:00) – Important – Forecast (1.5b%) – Previous (1.5b%).
  • EUR German Consumer Price Index (YoY) (AUG P): (GMT 12:00) – Important – Forecast (1.8%) – Previous (1.7%).
  • USD ADP Nonfarm Employment Change (Aug): (GMT 12:15) – Important – Forecast (183K) – Previous (178k)
  • USD Gross Domestic Product (Annualized) (2Q S): (GMT 12:30) – Important – Forecast (2.7%) – Previous (2.6%).
  • USD Gross Domestic Product Price Index (2Q S): (GMT 12:30) – Important – Forecast (1.0%) – Previous (1.0%).

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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