London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Sep 03 08 11:58 GMT |

A terrible Euro-zone retail sales report coupled with a small pullback in oil prices helped the buck extend gains modestly against most of the majors in the London session. Euro-zone retail sales for July registered a -0.4% decline after a downwardly revised -0.9% the prior month. The market was looking for an increase of 0.1% and thus the surprise was palpable. Oil meanwhile retreated about $1 in London trading towards a close near $108.20/bbl. Oil inventory data is delayed until tomorrow given the holiday this week and we would expect that coupled with the evolution of the current tropical storm activity to dictate the price action this week. EUR/USD closed London trading down a modest 20 pips but ran down as low as 1.4385 on the weaker data. GBP/USD was relatively unchanged near the 1.7720 mark though the pair did see a more than 100 pip hi to low swing in the span. The weak tone to oil prices helped nudge USD/CAD about 40 pips higher in the session towards a 1.0765 close. The latest Fed Beige Book is due up at 1800GMT and we believe it will closely resemble the July version. Of the areas where changes are most evident, declines in commodity prices suggest an easing of inflation pressures, which should reduce the urgency for the Fed to raise rates to combat inflation. The final impression should be that the Fed remains on hold for the foreseeable future. We think reduced expectations of a Fed rate hike will be stock-market friendly, and thus would look to selectively buy JPY crosses in advance of the report, closing out such positions before the end of the day. Upcoming Economic Data Releases (NY Session) Prior Estimate 9/3 103:00 GMT CA Bank of Canada Rate 3-Sep 3.00% 3.00% 9/3 14:00 GMT US Factory Orders JUL 1.70% 1.00% 9/3 16:30 GMT US Boston Fed's Rosengren Speaks 9/3 18:00 GMT US Fed's Beige Book Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.