USD/JPY remains volatile before US retail sales – Daily Market Brief, September 15, 2022

US futures point higher for a second day as attention shifts to US retail sales. Sales have proved to be reliant across the year, owing to the strong US jobs market.

·         The EC announces measures & regulatory changes for the energy crisis

·         FTSE rises, GBP/USD falls as UK consumer confidence falls

·         USD/JPY rises after Japan logs a record trade deficit

European stocks closed in the red yesterday for a second straight session amid follow-through selling from Tuesday’s US inflation shock. Cooler than expected, UK inflation failed to boost the FTSE, which closed the session 1.5% lower.

Stocks on Wall Street managed to close modestly higher after Tuesday’s deep CPI-inspired selloff. PPI inflation showed similar traits to CPI, with the headline figure cooling to 8.7% from 9.8%, but core PPI rose by more than forecast to 7.1%. The data suggests that inflation is more deeply embedded than previously thought.

EC energy crises support plans

European indices are edging higher, but the sentiment remains fragile. The European Commission has announced measures and regulatory changes to help ease the energy crisis by ramping up support to consumers and industries affected by soaring gas prices. 

The plans include a windfall tax on energy companies’ profits to raise €140 billion, even though EC President Ursula von der Leyen may struggle to get this signed off by member states. The DAX is pointing to a modest 0.1% rise on the open. The EUR/USD trades -0.2% lower at the time of writing.

UK consumer confidence falls

The FTSE is set to rise 0.3% on the open, but the pound continues to look vulnerable as it falls towards 1.15. According to the latest YouGov survey, consumer confidence fell into negative territory in August for the first time since the mid-2020 pandemic lockdown. Sentiment plunged a sizeable 4.2 points to 98.8 as consumers worried about the ongoing cost of living crisis.

Retail sales

The focus of the US session will be US retail sales. Sales have proved to be resilient across the year today. Sales have been positive each month except May when they fell -0.1%. Even as inflation hit a 40-year high, consumption has continued. This could be down to the strength that we are seeing in the US labor market. Weekly jobless claims have been edging lower in recent weeks and are expected to be 226k.

More recently, there have been signs of a slight slowdown in sales. US retail sales were flat in July and are expected to be flat again in August. However, with petrol prices falling and consumer sentiment starting to pick up again, there is a good chance that the resilience in retail sales will continue.

US futures and the USD are edging higher ahead of the European open.

USD/JPY

USD/JPY has seen a fair amount of volatility this week, with 1% swings almost becoming the norm. The pair fell 1.2% post US CPI data, only to rebound 1% on Wednesday as Japanese officials hinted strongly towards intervention to stem the rapid devaluation of the yen. Today, the pair is rising as the yen is among the worst performing major currencies after Japan logged a record trade deficit for August. Rising energy imports saw the deficit increase to 2.82 trillion yen ($1.97 billion).

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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