Article / 18 August 2016 at 11:32 GMT

Mid-session Europe: Sterling puffs chest after retail boost

Saxo Markets


Foreign exchange


A bumper UK retail sales print for July has helped sterling to beyond 1.3150 as warmer weather boosted food-and-drink sales and post-Brexit blues were dismissed after a poor June.

Eurozone CPI meanwhile missed a beat but EURUSD continues to press against beleaguered dollar.


  • Eurozone ECB Meeting Minutes                          (1130 GMT)

  • US Weekly Initial Jobless Claims                         (1230)

  • US Aug. Philadelphia Fed Survey                         (1230)

  • US Fed’s Dudley at Press Briefing                        (1400)

  • US Fed’s Williams (FOMC non-voter) to Speak    (2000)


Forex developments

It has been a GBP session with GBPUSD smashing through the tech resistance we have been noting as possible trigger for a higher GBPUSD at 1.3100 area. This was following impressive UK Retail Sales for July. The 1.3177 area is a 61% Fibo level from drop starting August 3, and rejected by GBPUSD for the time being. This is a second strong move following Monday's rally, and looks likely to continue pressuring on the upside, with tech support at the 1.3117 area through the 50% Fibo level from that move. So 1.3110 (the 21-day moving average) preferably needs to hold.

Our USDJPY view via spot got stopped out today, but the overall idea of higher USDJPY remains interesting ahead of the Bank of Japan and Federal Open Market Committee meetings, so we have initiated a buy call at 102.50 for Sep 23.

EURUSD is opening up to the next level of interest at 1.1400 area, which is a very interesting area, as EURUSD returned quite rapidly throughout the day to the 1.1400 levels on any rally attempts towards 1.1500 (Apart from April 29 and May 2 when it breached 1.1500). The 1.1500 level has been a line-in-the-sand for the pair only briefly breached in August 2015, but has otherwise held since January 2015. It is so important for USD bulls that any possible rallies beyond the decent technical resistance of 1.1400 to 1.1500 are short lived, or else it could be the start of something interesting higher. Being able to close below 1.1300 would bring some relief to USD bulls at moment.

FX Options volatilities

EURUSD volatilities are trading sideways so far today. There was a bigger move in GBP spot after very strong retail sales, with EURGBP down 60-70 pips on the number. For reference, the overnight EURGBP straddle was trading around 45 pips yesterday evening. Front-end vols are still holding up well despite the number now out of the way, but a big reaction in spot often cause further reactions in spot. JPY vols trading slightly lower from yesterday evening.

Fixed income





European shares are in green this morning as the market projects the FOMC rate hike cycle to further down the curve. The main beneficiaries were miners and commodity names, as Brent was testing the $50/barrel levelpartly  on the back of lower dollar.

Nestle is up 1% after releasing H1 results that affirm organic sales for 2016 are in line and the company is expecting the prices to rebound. Vestas Wind Systems is up 9% after the company reported better Q2 results, increased the annual guidance and announced a EUR 400 million share buyback program.

Raiffeisen International Bank is down 2% after an initial spike of almost 3% after reporting Q2 results. As per its executives, low interest rate, volume reduction and FX movements are putting pressure on profitability.

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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.


Sterling's enjoying one of its better days as bulls line up to take
advantage of dollar weakness and a fillip from UK retail sales. Photo: iStock 

— Edited by Martin O'Rourke

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


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