ews from central banks around the world has had a significant impact on currency trading overnight. GBP has rallied to the top of the charts after minutes from the last Bank of England meeting indicated members have become more balanced in their views over whether to raise interest rates with the UK economy improve. Although members remain focused on slack in the economy, concerns over the impact of low rates and rising house prices are growing. Strong retail sales out of the UK have also increased speculation that the MPC may become more hawkish in future.
JPY is also climbing today following today’s Bank of Japan meeting. While there were no surprises in the decision, there had been some speculation recently that more stimulus could be on the way forcing some traders to scramble when it didn’t materialize.
On the other hand, currencies with more neutral to dovish central banks continue to weaken. EUR keeps sliding on hints the ECB may be preparing to do some type of stimulus action at its June 5th meeting (although it may not be as much as the street is hoping for). Meanwhile AUD continues to drift after RBA minutes suggested rate hikes look unlikely anytime soon between the slowing Chinese economy and the drag from upcoming fiscal budget cuts.
Moving into the US trading day, the Fed may come into focus. There are four FOMC members speaking today, three of which are firmly entrenched in the dovish camp versus one hawk. FOMC minutes may also attract attention from traders looking for indications of how soon after the end of tapering the central bank may start raising interest rates.
US indices have stabilized this morning while European markets are mixed. In addition to the central bank news, another round of earnings reports is out from US retailers which did contain a few positive surprises and appears to be providing a bit of support for now.
Target $0.70 vs street $0.71, guides next Q to $0.85 to $1.00 short of street $1.02, cuts FY guidance to $3.60-$3.90 from $3.85-$4.15
Tiffany $0.97 vs street $0.78, same store sales 11%, raises FY guidance to $4.15-$4.25 from $4.05-$4.15
Lowes $0.58 vs street $0.60
Sears Canada ($0.74) vs previous ($0.31) same store sales (7.6%)
Economic reports released overnight and this morning include:
UK retail sales 6.9% vs street 5.1% vs previous 4.2%
US retail ex auto 7.7% vs street 5.4%
Japan monetary policy
decision no change to interest rates or QE as expected
Japan trade balance (¥808B) vs street (¥646B)
Australia consumer confidence 92.9 vs previous 99.7
Economic reports due later today include:
10:30 am EDT US crude oil inventories street 0.25 mmbbls
10:30 am EDT US gasoline inventories street 0.15 mmbbls
2:00 pm EDT US FOMC minutes
FOMC chair Yellen and members Dudley, George and Kocherlakota speak later today.
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