Thursday could have been possibly the most interesting day in financial markets this week. We got a bunch of macroeconomic releases which impacted many assets, here and there quite severely. However, the US dollar was not able to get back at least some of its recent losses, what’s more it was the worst performing currency in G10, again. Let’s take a closer look at the most important events which took place today.
First of all, the Australian jobs market showed its strength a second month in a row marking the best back-to-back performance since 1988. What’s more, an increase in employment was mainly due to full-time jobs which could make the June’s report even more hawkish. On the other hand, a recent uptick in the AUD exchange rate could urge the RBA to cool off market’s expectations which have mounted following the latest minutes. Either way, the AUD could keep prospering well against low yield currencies.
When it comes to the Bank of Japan’s decision there was no a surprise as the BoJ chose to leave monetary policy settings unchanged as it was widely expected. Albeit, it trimmed its inflation forecasts (yet again) spreading concerns among market participants whether the BoJ is able to lift prices towards its 2% target at all. It has to be said though, that the BoJ reveals its inflation projections arguably not to foretell a specific level of inflation but rather to solidify inflation expectations going forward.
Looking elsewhere, there was a print of UK’s retail sales which turned out to beat quite easily market consensuses. As a result, the pound has jumped to 1.30, reversing its earlier losses. Having looked into some details one could notice that higher sales was probably caused by a wave of heat which, in turn, had increased a demand for garments. Moreover, lower prices registered in the past month helped to prop up a demand as well making goods and services relatively cheaper.
The ECB left interest rates unchanged as it was broadly expected, main focus was on the press conference though. The euro gained in the aftermath as Draghi remained all options on the table with regard to the meeting in September (new macroeconomic forecasts will be published). On the one hand, Draghi kept talking up the economic outlook, on the other one, he’ was quite cautious in terms of the exchange-rate saying that ’tighter monetary conditions are the last thing the ECB wants’.
US data published today was disappointing once again, at least regarding the Philadelphia FED index. While a market estimation had indicated a rise from 27.6 to 23, an official print turned out to be even more depressing. It slumped to the lowest level this year suggesting that entrepreneurs have already begun raising some concerns in terms of clarity of the future’s conditions to run businesses.
Last but not least event was an expansion of Trump’s probe by the US special counsel pertaining to possible ties between the Donald Trump campaign and Russia in last year’s election. What all that means for the US dollar? In short, another wave of turmoil which ultimately could push back a possible tax reform even more bringing uncertainty across many classes of assets.