Cautious Tone in Global Currency Markets

Global investors remain cautious amidst Brexit uncertainty, US-Saudi tensions and choppy equity markets.

Previous Day's Market Highlights

The US Dollar was the major mover on Monday, falling after retail sales missed expectations. The Dollar fell 0.3% against sterling, 0.2% against the euro and 0.25% against the yen due to both retail sales and core retail sales missing forecasts by 0.2 and 0.4% respectively – with core retail sales declining compared to the previous month.
 
Sterling was little changed on the day despite an afternoon speech from PM May on the state of the Brexit negotiations. This gave little new information while the PM struck a relatively dovish tone despite the standoff in negotiations and the fact that negotiations are set to miss a key deadline of a deal being agreed at the EU summit this week.
 
Market focus was once again on equities, with global markets setting a cautious tone after last week’s sell-off. Markets in Europe lost around 0.3% over the course of the day, with US indices also losing ground after a choppy trading session. This resulted in a strengthening yen as well as gold prices rising 1%.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1373 1.1463 1.1112 3.06%
GBP/USD 1.3164 1.3298 1.2922 2.83%
EUR/USD 1.1575 1.1815 1.1436 3.21%
GBP/AUD 1.8496 1.8735 1.7937 4.26%
GBP/NZD 2.0054 2.0481 1.9554 4.53%
GBP/CAD 1.7106 1.7286 1.6598 3.98%

Today's Market Highlights

Another busy calendar today began with the release of minutes from the latest monetary policy meeting of the Reserve Bank of Australia. The Aussie dollar was modestly weaker after the minutes stuck to a familiar script, while reiterating that the next interest rate change is likely to be a hike. 
 
The main event today is the release of the UK labour market report for September. Sterling’s reaction will likely be on the back of the average earnings index, with the consensus being for a dip to 2.4% (3m/y). Other highlights from the report will be the unemployment rate, forecast to remain unchanged at 4%, and the claimant count change which is expected to increase slightly to 10.0k on a month-on-month basis. Despite this data, any Sterling moves are likely to remain subdued due to the cloud of uncertainty over the Pound, with any longer term trends dictated by the Brexit negotiations and the form of any deal that is reached with the European Union. Brussels has given the UK a day to settle its negotiating position before responding after the ‘pause’ in negotiations over the weekend. 
 
Lower impact data makes up the remainder of the day’s releases including Eurozone trade balance for August (forecast €15bln) as well as US JOLTS Job Openings (forecast 6.9mln). Aside from the busy slate of data, market participants will also have one eye on the rising tensions between the west and Saudi Arabia, an escalation of these tensions would likely see increasing oil prices over fears of Saudi Arabia retaliating in the diplomatic spat using their oil exports. . 
 
There is also a plethora of central bank speakers slated for today, including MPC member Cunliffe, Fed voter Daly and RBA assistant governor Debelle. As always, focus will be on hints of future monetary policy tightening as global central banks continue to unwind the stimulus packages that were implemented in the aftermath of the financial crisis in 2008.

Today's Economic Calendar

Time Currency Release Consensus Previous
1:30am AUD RBA Monetary Policy Minutes
9:30am GBP Average Earnings Index (3m/y) 2.4% 2.6%
9:30am GBP Unemployment Rate 4.0% 4.0%
10:00am EUR Trade Balance 15.0bln 12.8bln
3:00pm USD JOLTS Job Openings 6.90mln 6.94mln

Caxton