USD Rally Pauses Following Mixed Retail Sales – GBP Falls On Big UK Retail Sales Miss

Yesterday’s US retail sales for August painted a mixed picture for consumer activity. On the
one hand, headline retail sales were seen improving to 0.3% on the month, above
expectations for a 0.1% reading. However, core retail sales were seen falling to -0.3%, below
estimates for a -0.1% reading.

On the whole, the market reaction saw a continued lift in yields which kept equities and
commodities prices pressured lower over the session. Following on from Tuesday’s strong
US inflation reading, markets are still pricing in the risk of an even larger 100bps hike from
the Fed next week. For today’s session, preliminary UoM consumer sentiment data will be
the key release to monitor, expected at 60 from 58.2.

Key Factors for Today

- USD rally pauses following mixed US retail sales report – focus still on larger fed tightening next week
- Equities prices sink further as bond yields continue to rise
- UK retail sales drop heavily last month
- NZD leading in FX following better data
- Metals and oil sink – gold hits fresh 2022 lows

Coming Up

- CAD Canadian wholesale sales
- USD US prelim UoM consumer sentiment
- USD US prelim UoM inflation expectations

Equities Prices Remain Under Pressure As Bond Yields Rise

Equities prices were seen turning lower once again yesterday. The pickup in bond yields
over the week has weighed heavily on stock markets with the US 2-year alone rising over
30bps this week. Both the Nasdaq and the S&P have broken down to fresh monthly lows
over early European trading today.

Vantage Towers Shares Jump on Equity Stake News

In the UK, shares in both Vodafone and Vantage towers have seen plenty of upside into the
end of the week, the latter seeing a 14% jump yesterday. The moves come in response to
reports that private equity firms Global Infrastructure Partners and KKR are looking to buy
into Vantage Towers, with Vodafone owning 82% of the company.

NZD Leading in FX

In FX, we’ve seen the US Dollar rally pausing following initial strength on Tuesday. This dynamic has allowed other currencies to recover somewhat with, interestingly, NZD among the stronger performers over the European open on Friday. NZD has seen some better data prints this week which are likely helping, including a solid quarterly GDP beat. JPY has seen strength again today as the currency continues to draw demand from safe-haven inflows and chatter linked to potential BOJ intervention following reports of a price check earlier in the week.

GBP Falls Following Retail Sales Miss

GBP and CAD have been the weakest performers so far today. Growth fears in the UK are keeping the currency pressured ahead of next week’s BOE meeting following a sharp drop in retail sales for last month, reported this morning. CAD has come under pressure amidst the drop in oil prices which have turned lower once again this week.

Gold Hits Fresh 2022 Lows

In the metals and commodities space, both gold and silver have been under pressure again on Friday. Gold prices in particular have been hard hit with XAUUSD breaking down to fresh 2022 lows, while silver has shown a little more resilience. Oil prices have come under pressure into the end of the week also as recession fears weigh on the demand outlook. The EIA reported a larger-than-expected build in crude stores last week, adding to the bearish tone for oil traders.