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Currencies May Move More on US Retail Sales Data vs. BOE, SNB

Currencies May Move More on US Retail Sales Data vs. BOE, SNB

Ilya Spivak,

Talking Points:

  • Pound probably won’t find lasting catalyst in BOE policy announcement
  • SNB rate decision likely another non-event but vigilance seems prudent
  • US Dollar looks to Retail Sales data to inform Fed rate hike speculation

The Bank of England rate decision seems unlikely to inspire a strong reaction from financial markets. Governor Mark Carney and company laid out the case for a wait-and-see stance in testimony before Parliament’s Treasury Select Committee last week, revealing most everything that would have been market-moving in today’s announcement. The vote tally on the rate-setting MPC committee may be noteworthy in the event of a break from unanimity, but significant follow-through from the British Pound seems unlikely.

The Swiss National Bank is also due to make its monetary policy announcement. Headline and core measures of inflation have steadily recovered since the beginning of the year. Indeed, realized outcomes on measures of price growth have increasingly outperformed relative to market economists’ expectations in 2016. Meanwhile, the benchmark EUR/CHF exchange rate has trended cautiously higher since the last central bank meeting in mid-June. On balance, this suggests policymakers probably don’t feel an urgent need for further action at this point.

With that in mind, it is important to remember that the SNB operates quite differently from other major central banks. This is the monetary authority that unceremoniously abandoned a floor of 1.20 on EUR/CHF just days after claiming it as an essential pillar of policy, after all. As such, vigilance seems prudent despite the seemingly low probability of a change in posture. The quarterly update of the central bank’s inflation forecast may also prove noteworthy, particularly if a major revision fuels speculation of a policy adjustment on the horizon in the near term.

The spotlight will turn to US Retail Sales data later in the day. Receipts are expected to edge down 0.1 percent in August having registered flat in the prior month. US economic news-flow has increasingly disappointed relative to consensus forecasts since late July. More of the same this time around may weigh against Fed rate hike bets spurred on by hawkish comments from FOMC officials over recent weeks. Such a result is likely to bode ill for the US Dollar while yield-sensitive alternatives in the commodity bloc see outsized gains. Needless to say, an upside surprise will probably send the greenback upward.

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Asia Session

22:30NZDBusinessNZ Manufacturing PMI (AUG)55.1-55.5
22:45NZDGDP SA (QoQ) (2Q)0.9%1.1%0.9%
22:45NZDGDP (YoY) (2Q)3.6%3.6%3.0%
01:00AUDConsumer Inflation Expectation (SEP)3.3%-3.5%
01:30AUDEmployment Change (AUG)-3.9k15.0k25.3k
01:30AUDUnemployment Rate (AUG)5.6%5.7%5.7%
01:30AUDFull Time Employment Change (AUG)11.5k--46.1k
01:30AUDPart Time Employment Change (AUG)-15.4k-69.6k
01:30AUDParticipation Rate (AUG)64.7%64.9%64.9%
01:30AUDNew Motor Vehicle Sales (MoM) (AUG)0.1%--1.4%
01:30AUDNew Motor Vehicle Sales (YoY) (AUG)2.9%-1.3%
01:30AUDRBA FX Transactions Government (AUG)-657m--463m
01:30AUDRBA FX Transactions Market (AUG)607m-444m
01:30AUDRBA FX Transactions Other (AUG)67m-48m

European Session

06:00EUREU27 New Car Registrations (AUG)-6.9%Low
07:30CHFSNB 3-Month Libor Lower Target Range (SEP 15)-1.25%-1.25%High
07:30CHFSNB 3-Month Libor Upper Target Range (SEP 15)-0.25%-0.25%High
07:30CHFSNB Sight Deposit Interest Rate (SEP 15)-0.75%-0.75%High
08:30GBPRetail Sales Ex Auto Fuel (MoM) (AUG)-0.7%1.5%Medium
08:30GBPRetail Sales Ex Auto Fuel (YoY) (AUG)4.8%5.4%Medium
08:30GBPRetail Sales Inc Auto Fuel (MoM) (AUG)-0.4%1.4%Medium
08:30GBPRetail Sales Inc Auto Fuel (YoY) (AUG)5.4%5.9%Medium
09:00EUREurozone Trade Balance SA (JUL)22.0b23.4bLow
09:00EUREurozone Trade Balance NSA (JUL)29.6b29.2bLow
09:00EUREurozone CPI (MoM) (AUG)0.1%-0.6%Medium
09:00EUREurozone CPI (YoY) (AUG F) 0.2%-Medium
09:00EUREurozone CPI Core (YoY) (AUG F) 0.8%0.8%Medium
11:00GBPBank of England Bank Rate (SEP 15)0.25%0.25%High
11:00GBPBOE Asset Purchase Target (SEP)435b435bHigh

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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