TALKING POINTS – US DOLLAR, CHINA, RETAIL SALES, FED, AUSTRALIAN DOLLAR
- Aussie, NZ Dollars rise as Chinese data boosts market-wide risk appetite
- US Dollar under pressure as improving sentiment trims haven demand
- Firming Fed interest rate hike outlook may translate into USD recovery
The sentiment-geared Australian and New Zealand Dollars outperformed as risk appetite swelled in Asia Pacific trade. A catch-all gauge of regional stocks’ performance from MSCI rose 1.5 percent. Taken together with Thursday’s similarly impressive gains, that sets the stage for the best two-day run in seven months.
Upbeat Chinese economic data appear to be behind investors’ chipper mood. Perhaps most critically, outperformance on retail sales statistics might suggest the East Asian giant is better insulated against weakness in the external sector courtesy of the ongoing trade war with the US.
Meanwhile, the US Dollar proved to be weakest on the session as the risk-on mood cut into the benchmark currency’s haven appeal. Sellers may have been further encouraged by the earlier release of unexpectedly soft US CPI data, although it did not seem to have a lasting impact on Fed rate hike bets.
Looking ahead, futures tracking the FTSE 100 and S&P 500 equities benchmarks are pointing convincingly higher before London and New York come online, suggesting the markets’ upbeat may find follow-through. On the data front, US retail sales and consumer confidence numbers are in focus.
Receipts are seen slowing in August while sentiment improves after two months of moderation. If CPI data was unable to derail the upshift in Fed rate hike bets following last Friday’s rosy jobs report, these outcomes seem even less likely to do so even absent improbably dramatic disappointments.
With that in mind, the releases’ passing may be of greatest influence. With event risk out of the way, the door may be opened for the greenback to recover. In fact, to the extent that easing market stress allows the Fed greater leeway to tighten, the risk-on mood may become an asset rather than a liability.
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ASIA PACIFIC TRADING SESSION
EUROPEAN TRADING SESSION
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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