Intraday Market Thoughts

UK Sales Disappoint; Gold ABove 1800, Watch Philly Fed

by Patrik Urban
Aug 18, 2011 13:09

USD is stronger across the board since London traders got to their desks. UK Retail Sales came out below expectations. Market turns to CPI, housing data and Philly Fed Index, which could is nearing the zero level.

GBP is weaker after UK July Retail sales disappointed when they came out at 0.2% after increasing by 0.8% in June. The yearly figure stayed unchanged. The weak print is blamed on frail labor market, stagnant earnings and elevated inflation. GBPUSD recovery after the weak labor market data yesterday was nothing short of remarkable. Debt problems that plague the Eurozone and the US are possibly the reason behind continued demand for the Sterling.

The New York session will start at 8:30 am ET with Unemployment claims that are expected to jump back above the 400K mark again and reach 402K after dropping to 395K a week earlier. More importantly, traders will get July consumer inflation data that are projected to increase by 0.2% after decreasing by -0.2% in June. Core CPI should also increase by 0.2% from previous 0.3%.

Considering the increase in PPI we obtained yesterday, CPI could surprise to the upside as producers are likely to pass higher costs onto consumers. In such a case, USD could strengthen as the Fed would be less likely to introduce additional QE.

Existing home sales are due at 10:00 am ET and are expected to increase to 4.91M from 4.77M. Philly Fed Index that is due at the same time is projected to increase to 4.0 from 3.2. While readings above 0 indicate improving conditions, it is important to keep in mind that this index reached high of 43.4 just five months ago.


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