Dollar softer amid mixed US data
While Friday’s US economic data were something of a mixed bag, the dollar ended a little lower on the day. Over the week it shed around half a cent and one cent against the euro and sterling respectively, and is trading at about $1.17 and $1.3550 this morning. EURGBP is a touch firmer than Friday morning’s levels at about £0.8640. Looking to the week ahead, the main focus will be on Fed Chair Powell’s speech at the annual central banking symposium in Jackson Hole on Friday, and in particular whether he gives any signal regarding a cut in interest rates at September’s monetary policy meeting (16th -17th). The market pared back expectations a bit over the second half of last week but still sees about a 65% chance of a 25bps cut next month. In terms of economic data, flash PMIs for August are due in the main economies on Thursday, while there are a number of UK releases scheduled including CPI inflation (Wednesday) and retail sales (Friday).
German and UK long-term bond yields backed up quite a bit on Friday, though there didn’t appear to be any obvious catalyst, with 10- and 30-year yields ending around 7-8bps higher on the day. Equivalent US yields also rose albeit by just 3-4bps. In equity markets, the S&P 500 retreated a little from Thursday’s all-time high but still gained almost 1% on the week, while European stocks outperformed over the week, adding just over 1%.
Friday’s economic data in the US were a mixed bag. Retail sales were broadly in line with expectations, rising by 0.5% in nominal terms in July following an upwardly revised increase of 0.9% in June. However consumer confidence fell back sharply in August according to the University of Michigan’s latest survey, amid a jump in consumers short- and medium term inflation expectations.
Looking to the day ahead, it’s very quiet on the economic data front with the Euro area trade balance and the Home Builders housing market index in the US the only releases of note, while Trump’s meeting with Ukraine’s Zelensky and other European leaders will command the market’s attention.