Stocks Consolidate after Sell-off, US Retail Sales Due Next

Following on from Tuesday’s US CPI reading, markets are now bracing for the next key release with US retail sales for August due later today. Yesterday saw much quieter action across markets as traders digested the prior day’s volatility. While the Dollar remained well bid keeping risk assets pressured lower, we didn’t see any further breakout moves in stocks, or elsewhere, with most markets simply treading water over the day.

Interestingly, the market is looking for a negative reading today on the headline figure which, if seen, will likely counter some of the recent USD upside we’ve seen. Given that we’ve only had one retail sales miss this year, however, it might be the case that the bar is set low today for USD bulls with an upside surprise likely to drive the USD rally further.

Key Factors for Today

- USD remains bid as traders brace for August retail sales data
- Equities markets tread water as most markets stabilise following Tuesday’s losses
- JPY higher in FX, driven by safe-haven demand and BOJ intervention chatter
- Risk currencies lower – Aussie hit by weaker labour market data
- Gold prices testing 2022 lows – oil holding up despite bearish EIA release

Coming Up

- EUR Eurozone Trade balance
- USD US Retail sales
- USD US Empire manufacturing index

Equities Prices Consolidate Following Tuesday’s Volatility

It was a quieter day yesterday across equities markets and, on the back of the fireworks we saw on Tuesday, this was no bad thing. Following on from those US CPI driven losses, most indices managed to hold their place yesterday. US Stocks sat just off their weekly lows, with similar trading seen in Asian stocks and in UK markets also. However, the DAX was seen breaking down further on the week as news of the European Commission applying a new windfall tax to energy companies hit investor sentiment in Europe.

USD & JPY Lead in FX

In FX, the early European session on Thursday has seen a continuation of the themes which dominated yesterday. Along with a stronger US Dollar, the Japanese Yen has been the best performing currency. JPY has been boosted by safe-haven demand, driven by the drop in risk sentiment this week, along with anticipation of BOJ intervention. Yesterday the Japanese Nikkei newspaper reported a BOJ “price check”, said to be a pre-cursor to the NOJ selling foreign FX holdings in a bid to prop up JPY without needing to raise rates.

AUD Hit by Weaker Jobs Data

Risk currencies have been on the backfoot again today. Overnight, Aussie labour market data saw the unemployment rate ticking a little higher last month to 3.5% from 3.4% prior. Kiwi traders did a little better, however, with the latest quarterly GDP figure coming in at 1.7% vs 1% expected.

Gold Prices Testing 2022 Lows, EIA Reports Large Inventories Build

In the metals and commodities space, both gold and silver turned lower again yesterday with gold prices now once again testing the YTD lows. Price action looks a little more encouraging in silver, at least, though a stronger USD is still creating a barrier to higher
prices. Oil prices remain pressured also, though price is still holding back above the prior 2022 lows following last week’s recovery. Yesterday, the EIA reported a larger than expected 2.4 million barrel surplus in US commercial crude stores, adding to the challenges
for oil traders today.