Having given a reaction to the prospect of the Fed cutting interest rates at the July meeting, a period of consolidation has overcome the major markets. The euro is quiet in the middle of a five month trading range, whilst gold is finally showing signs of settling down after recent volatility, and even the upside breakout on Wall Street is losing steam. Markets are looking for the next catalyst. Today, the focus will be on US Retail Sales, to see if the US consumer can impact on the Fed’s outlook in any way. Fed chair Jerome Powell is also speaking, and in front of such a crucial July FOMC meeting, any Fed speak will be market moving. However, this morning will also be important for sterling traders, with key wage growth data hopefully able to briefly take attention away from the politics of Brexit. Also the German ZEW sentiment gauges give a key insight into the path of the German economy, which is a drive behind the Eurozone and by extension the euro. In a period of quiet on markets, the reaction of bond yields to these data points becomes increasingly important. Yield differentials take a more prominent role in direction of currency pairs. So watching Treasury yields could be the source of how to find direction right now.
Wall Street closed an incredibly tight session, marginally higher with the S&P 500 half a tick higher at 3014. US futures are still steady today +0.1% higher, but Asian markets have been cautious overnight, with the Nikkei -0.7% and Shanghai Composite -0.3%. European markets are also circumspect this morning, with FTSE futures -0.2% and DAX futures +0.1% early today. In forex, there is a mixed outlook on USD, with AUD a shade lower on a dovish lean from the RBA minutes, whilst NZD continues to recover well. In commodities, the dollar consolidation and lack of intent on markets means that gold is all but flat, whilst oil is holding yesterday’s renewed weakness as the Gulf of Mexico platforms came back into production.
There are a number of key data points to be aware of on the economic calendar throughout today’s session. Firstly comes the UK employment data for May is announced at 0930BST. UK Unemployment is expected to have remained at 3.8% (3.8% in April) with a 45,000 increase in employment (+32,000 in April). The UK Average Weekly Earnings growth is expected to remain at +3.1% (3.1% in April). Euro traders will be looking out for German ZEW Economic Sentiment at 1000BST. Sentiment for July is expected to have deteriorated again to -22.3 (from -21.1 in June), whilst the ZEW Current Conditions component is expected to have declined to +5.0 (form +7.8 last month). US Retail Sales at 1330BST is the big focus for US data, which Is expected to show an improvement of +0.1% (ex-autos) in June (down from +0.5% in May). US Industrial Production at 1415BST is expected to have improved by +0.1% in June (down from +0.4% in May), whilst Capacity Utilization is again expected to be 78.1% (78.1% in May).
Traders should also keep an eye out for the comments of Fed speakers ahead of a crucial FOMC meeting at the end of the month. Today there is Fed chair Powell (centrist) at 1800BST, whose speeches always garner attention,