Market Roundup
• US Retail Sales MM Aug, -0.2%, 0.1% forecast, 0.6% previous.
• US Business Inventories MM Jul, 0.2%, 0.2% forecast, 0.5% previous.
• US Industrial Output MM Aug, -0.9%, 0.1% forecast, 0.2% previous.
• US Retail Control Aug, -0.2%, 0.3% forecast, 0.6% previous.
• US Capacity Utilization MM Aug, 76.1%, 76.8% forecast, 76.7% previous.
• US Manuf Output MM Aug, -0.3%, 0.3% forecast, -0.1% previous.
• US Retail Sales Ex-Autos MM Aug, 0.2%, 0.5% forecast, 0.5% previous.
• US U Mich Sentiment Prelim Sep, 95.3, 95.1 forecast, 96.8 previous.
• US NY Fed Manufacturing Sep, 24.40, 19.00 forecast, 25.20 previous.
• Goldman economists trim US 3rd qtr GDP view to 1.6 percent.
• US says North Korea endangers the whole world after missile test.
• Canada debt-to-income hits record as consumers face higher rates.
• Canadian home resales rose in August after 4 declines –CREA.
• Venezuela publishes oil prices in Chinese currency to shun US dollar.
Looking Ahead - Economic Data (GMT)
• No significant events
Looking Ahead - Events, Other Releases (GMT)
• 07:00 BOE’s Carney gives a lecture at the IMF (Sep 18)
• 18:30 BOC’s Timothy Lane speaks in Saskatchewan, Canada (Sep 18)
• N/A ECB’s Angeloni participates in Conf. in Rome (Sep 18)
Currency Summaries
EUR/USD is likely to find support at 1.1875 levels and currently trading at 1.1940 levels. The pair has made session high at 1.1987 and hit lows at 1.1926 levels. Euro inched higher against dollar on Friday as the greenback was weighed down by an unexpected decline in U.S. retail sales last month that once again dimmed expectations for an interest rate increase in December. Fed policymakers are unlikely to change their cautious stance on raising rates as they are widely expected to focus on rolling out their plan to scale back the central bank's $4.2 trillion bond holdings at next week's meeting .U.S. retail sales unexpectedly fell in August and industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could dent economic growth in the third quarter. The Commerce Department said retail sales dropped 0.2 percent last month, the biggest decline in six months as motor vehicle sales tumbled 1.6 percent. Sales of building materials, electronics and appliances as well as clothing also fell. The disappointing U.S. data, which included industrial output in August, came after a report that showed the strongest increase in consumer prices in seven months. The euro was up 0.3 percent at $1.1940 staying below a 2-1/2 year high set last week. That pushed the dollar index to 91, down 0.4 percent on the day.
GBP/USD is supported in the range of 1.3500 levels and currently trading at 1.3572 levels. It reached session high at 1.3615 and dropped to session low at 1.3520 levels. Britain's rose sharply against the dollar to hit highest level since the result of the Brexit vote on Friday as investors doubled down on bets the Bank of England would raise interest rates soon. Comments from BoE policymaker Gertjan Vlieghe echoed the central bank's signal this week that the first rate increase in a decade could happen in "coming months", catapulting the pound past the $1.36 mark for the first time since June 24, 2016, the day of the EU referendum result. In the late US session, the currency eased off its $1.3616 high to trade 1.5 percent up at $1.3571, and on track for a 3.6 percent weekly gain on a trade-weighted basis - its best performance since February 2009. Analysts arguing against an imminent hike by the BoE have said the central bank's job has been complicated by wages, which have not kept pace with inflation, and an economy facing the uncertainty of Britain's vote to leave the European Union, making the BoE less likely to move soon. Traders will be watching for a speech on Brexit next week by Prime Minister Theresa May. The next round of Brexit talks with the European Union has been postponed by a week until Sept. 25.
USD/CAD is supported at 1.2080 levels and is trading at 1.2185 levels. It has made session high at 1.2216 and lows at 1.2140 levels. The Canadian dollar was little changed against its U.S. counterpart on Friday as an unexpected fall in U.S. retail sales pressured the greenback, while investors weighed data showing Canadians debt as a share of income reached a record high. The ratio of debt to disposable income rose to 167.8 percent in the second quarter from a downwardly revised 166.6 percent in the first quarter, Statistics Canada said. The Bank of Canada, which has raised interest rates twice in the last three months, has been concerned that highly indebted Canadians have less flexibility to deal with sudden changes in their income. Resales of Canadian homes rose 1.3 percent in August from July, breaking a string of four straight monthly declines, as Toronto sales bounced back after dramatic cooling during the spring market, separate data from the Canadian Real Estate Association showed. The U.S. dollar retreated against a basket of major currencies after data showed U.S. retail sales fell 0.2 percent in August as Hurricane Harvey likely depressed motor vehicle purchases. The Canadian dollar was last trading nearly unchanged at C$1.2183 to the greenback, or 82.22 U.S. cents.
AUD/USD is supported around 0.7960 levels and currently trading at 0.78000 levels. It hit session high at 0.8028 and made session lows at 0.7993 levels. The Australian dollar edged lower against the dollar on Friday as markets priced in a greater risk of rate increases in the United States and the UK, but scant chance of any near-term tightening at home. The Australian dollar was pinned at $0.7999, to be down 0.7 percent for the week so far having failed to hold the recent two-year peak of $0.8125. Rising rates abroad are becoming a theme, with Canada having already tightened twice in recent months while the Bank of England took a surprisingly hawkish turn on Thursday by saying a hike was likely if inflation kept accelerating. A hike in Australia is considered a more distant prospect given still low inflation, sluggish wage growth and the mountain of debt held by households. While data this week showed employment was surging, it was being met by an increase in the supply of labour that limited the upward pressure on wages and inflation. While North Korea's latest missile launch over Japan and a bomb explosion in the London subway were shrugged off by financial markets.
Equities Recap
European shares dipped on Friday as another North Korean missile launch softened appetite for riskier banks and miners but still scored their strongest week since July as attractive valuations tempted investors.
UK's benchmark FTSE 100 closed down by 1.2 percent, the pan-European FTSEurofirst 300 ended the day down by 0.46 percent, Germany's Dax ended down by 0.1percent, France’s CAC finished the day down by 0.3 percent.
The S&P 500 closed at a record high on Friday, hitting the 2500 level for the first time, as technology stocks bounced back after two days of declines and telecommunications shares also rose.
Dow Jones closed up by 0.29 percent, S&P 500 ended up 0.17 percent, Nasdaq finished the day up by 0.28 percent.
Treasuries Recap
Yield spreads between shorter-dated and longer-dated Treasuries contracted on Friday as traders added to bets the Federal Reserve would wait until the end of the year to raise rates and focus on its balance sheet at next week's policy meeting.
The benchmark 10-year yield was 2.201 percent, up marginally on the day. It hit a three-week peak at 2.225 percent on Thursday.
The yield on two-year Treasury notes was up 1.6 basis points at 1.384 percent. It touched 1.388 percent for a second time earlier Friday, which was its highest since July 26.
Commodities Recap
Gold prices fell on Friday after a European Central Bank (ECB) official called for scaling back the bank's stimulus program, although losses were capped when weaker-than-expected U.S. economic data raised questions about further interest rate hikes.
Spot gold was down 0.6 percent at $1,321.88 an ounce by 1:47 p.m. EDT (1747 GMT). It was down 1.8 percent for the week, on track for its biggest weekly decline since early July. U.S. gold futures for December delivery settled down 0.3 percent at $1,325.20.
Brent oil prices held near five-month highs on Friday, and were on track for the biggest weekly gain since late July, on forecasts for rising demand and the gradual restart of U.S. oil refineries.
U.S. crude settled unchanged at $49.89 per barrel and Brent rose 15 cents to settle at $55.51 a barrel.
