Risk appetite improved notably on Wednesday as investors shrugged off the threat of a government shutdown in the United States to focus on the three-day Jackson Hole gathering of central bankers in Wyoming, which starts today. The US dollar extended its Asian session gains to climb towards 109.50 yen, but the euro floundered ahead of an extended speech by ECB head Mario Draghi tomorrow in Jackson Hole.
GDP data dominated the early European session as growth figures were released in Norway and the United Kingdom. British growth was unrevised at 0.3% quarter-on-quarter for the second quarter as expected, but the component breakdowns painted a bleak picture for the UK economy. Business investment was flat in the three months to June, missing forecasts of a 0.4% quarterly gain, while household spending rose by a meagre 0.1%. Other UK data included the CBI’s retail sales survey, with the balance of reported sales falling unexpectedly to -10 from +22. Forecasts were for a reading of +15.
The pound initially spiked down after the data, only to quickly resume its uptrend that began in late Asian trading on euro/pound selling. Sterling touched a session-high of $1.2836 before settling around $1.2810 in late European session. The euro slipped against the pound as traders took profit from the pair’s sharp gains yesterday. Euro/pound hit a low of 0.9189 from yesterday’s 10-month lows before attempting to reclaim the 0.92 level. The single currency also lost ground versus the dollar, easing to around the $1.18 handle.
The Norwegian krone firmed against both the dollar and the euro after growth in Norway jumped to 1.1% q/q in the second quarter. This is up sharply from the growth of just 0.2% in the prior quarter. The dollar was down by about 0.3% at 7.84 kr, with the euro falling a similar amount to 9.25 kr.
The greenback made a steady advance to 109.45 yen but the uptrend lost some of its shine after the release of worse-than-expected housing data. Existing home sales fell by 1.3% in July to an annual figure of 5.44 million. This compares with expectations of 5.57 million and a downwardly revised 5.51 million in June. The dollar slid to around 109.20 after the data, erasing some of the gains from stronger-than-expected weekly jobless claims. Initial claims for unemployment benefits rose by 2k to 234k last week, though this was better than forecasts of an increase to 238k.
The Australian and New Zealand dollars both bounced off support levels to recoup some of their earlier losses. The aussie was flat on the day at around the $0.79 level, while the kiwi fell marginally to $0.7216. The antipodean currencies have been dogged by political concerns in recent days with elections looming in New Zealand in what is turning out to be a tight race, and controversy surrounding senior Australian politicians over dual citizenship.
In commodities, gold was weaker on the back of risk-on and a stronger dollar. The precious metal was slightly lower at $1287 an ounce. Crude oil was also down, despite yesterday’s dip in US inventories and the threat of a hurricane hitting Texas, which could cause disruption to supply. WTI oil was 1.3% weaker at $47.79 a barrel and Brent crude was down by a lesser 0.8% at $52.16.
