Forex Investment and Currency Trading

The link between positive US data surprises and the USD has been at best tenuous in past months. Although data surprises have been broadly positive since the beginning of August, the one-month change in the TWI has barely been positive during the same period. The link with the US equity markets, however, has been much stronger - with the psoitive data surprises reflected in equity market gains. Why has this been the case? The waning foreign appetitie for US assets has been a crucial factor in its decline. The TIC data yesterday made for sombre reading - showing net private sector outflow of USD 131bn with central banks having to step in to fill the breach.

GBP: Upside risks for the rest of the week
 
UK retail sales data were a touch weaker than expectations - sales volumes were flat in August, having risen by 0.2% m/m in July (revised down from 0.4%) and slightly weaker than the consensus 0.1% m/m. Market economists view today’s data as consistent with the recent improvement we have seen in consumer confidence, demonstrating that rising unemployment is not in itself an impediment to recovery in retail activity. GBP traded lower ahead of the retail sales number overnight but has since recovered and has traded with the broad USD sentiment in the market. The risks for GBP for the rest of the week are to the upside.