AUD/USD hits 7-month low
Better-than-expected Australia retail sales data helped AUD/USD to recover from early intra-day lows, but not before the FX pair had reached the lowest since the mini flash crash on January 3. Retail sales rose 0.4% m/m, the strongest growth rate in four months and more than the 0.1% gain economists had expected. It was also a strong improvement on May’s +0.1%.
Another factor supporting the Aussie was a tick higher in producer prices in the second quarter. Q2 PPI increased 0.4% q/q and 2.0% y/y, both 0.1% above economists’ forecasts. AUD/USD had slid to 0.6795 before the data, but managed a rebound back above the 0.68 handle to a high of 0.6819 immediately after the release. The FX pair is now at 0.6805.
Once again the FX pair appears on the verge of breaking the longest losing streak in more than a decade, but that possibility has reversed later in the day already this week, notably after the less-dovish than expected FOMC meeting.
AUD/USD Daily Chart
Trade wars hot up
Just as US President Trump introduced another step up in tensions in the US-China negotiations with his additional tariff threat, another trade war in Asia has taken a turn for the worse. Japan has removed South Korea from its trusted export destination white list, with Japan’s trade minister Seko confirming it will take effect on August 28. Countries on the white list benefit from less-stringent checks, but Japan has accused South Korea of being slack on the management of sensitive materials and claims that the move is a matter of national security. South Korea has denied the claim.
There wasn’t much of a reaction in the currency markets, but shares in South Korean giants Samsung and Hynix came under considerable pressure. The Japan 225 index, already under pressure from yesterday’s drop on Wall Street, fell to the lowest since June 18, extending the recent decline to a fifth day, the longest losing streak since December last year.
Japan225 Daily Chart
US payrolls day
Later today we see the US employment report for July. Estimates suggest the US economy added 164,000 jobs last month, a smaller amount than June’s 224,000 and below the six-month moving average of 172,000. Some commentaries are warning that the headline number may be affected by Census hiring in the month, which would only be a short-term phenomenon.
The unemployment rate is seen holding steady at 3.7% while average hourly earnings are also expected to be unchanged at +0.2% m/m.
The rest of the calendar
Before the US payroll fun and games we have Euro-zone retails sales for June on tap, along with the region’s producer prices. Retail sales are expected to show a strong rebound from May’s 0.3% decline with a +0.2% reading.
US Michigan consumer sentiment is expected to tick higher to 98.5 from 98.4 while factory orders are seen rising 0.8% m/m in June, negating completely the 0.7% decline seen in May.
