Intraday Market Thoughts

UK Kept Calm and Carried On

by Adam Button
Sep 6, 2016 0:02

The pound rose again in holiday-thinned trading Monday as yet-another data point showed a solid economy. The yen was the top performer as some of last week's softness reversed and the US dollar lagged. CFTC positioning showed growing bets against the euro and for the loonie. The RBA decision is due at 04:30 GMT. US services ISM is at 14:00 GMT. The latest Premium video has been posted.

A powerful theme in the past two weeks has the rise of the pound. It led all G10 currencies last week as GBP/JPY rallied 440 pips.

The drivers have been entirely fundamental. It continues Monday as the Markit services PMI was at 52.9 compared to 50.0 expected. That's the largest jump on record as it increased from July's 47.4 reading in the immediate aftermath of the vote.Cable immediately rallied three-quarters of a cent.

Although the pound later gave back much of the gains the upbeat data can no longer be regarded as an outlier. Since mid-August here are some data highlights:

Jobless claims fell 8.6K vs +9.0K exp Retail sales ex auto fuel +1.5% vs +0.3% exp CBI retail sales +9 vs 0 exp Nationwide house prices +0.6% m/m vs -0.2% exp Markit manufacturing 53.3 vs 49.0 exp

UK consumers, it seems, kept calm and carried on after a small fright in the aftermath of the vote. PM May filled the power vacuum and instilled some confidence. Now it might be time for the pound to carry higher.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -82K vs -77K prior JPY +64K vs +60K prior GBP -92K vs -95K prior CHF +8K vs +1.8K prior AUD +43K vs +43K prior CAD +22K vs +17K prior NZD +1.8K vs -0.9K prior

Nothing jumps out from the latest report. EUR shorts had been diminishing for the previous five weeks and the small increase here is just a bounce. The net long in CAD is starting to get interesting, especially if OPEC proves to be a flop.

Act Exp Prev GMT
ISM Non-Manufacturing PMI
55.4 55.5 Sep 06 14:00
Eurozone Spanish Services PMI
56.0 55.1 54.1 Sep 05 7:15
Eurozone Final Services PMI [F]
52.8 53.1 53.1 Sep 05 8:00
Eurozone Retail PMI
48.9 Sep 06 8:10
BRC Retail Sales Monitor (y/y)
-0.9% 1.1% Sep 05 23:01
Eurozone Retail Sales (m/m)
1.1% 0.5% -0.1% Sep 05 9:00

Latest IMTs