London RationalFX

RationalFX: Sales expectations miss possibly hindering the Euro

RationalFX: Yesterday’s US GDP numbers surprisingly showed the economy grew faster than initially thought in the second quarter of this year.

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This morning saw the early release of the German retail sales data, which showed a sharp drop of 5.1% month-on-month versus the July reading. On an annualised basis, the figure was also disappointing as Retail sales came in at -0.3%, much lower than the expected 3.7% number and the June figure.

The euro had been one of the best performing currencies post-Jackson Hole, but this poor data may put the brake on recent strength. This is despite the fact that the European Central Bank is expected to be well behind the Federal Reserve and Bank of England in raising interest rates. Some minds have changed since Powell’s speech at Jackson Hole, where he heavily indicated that the Fed is in no rush to raise rates.

Two ECB members have also started to rebel from consensus and called for a reduction in the vast monetary support. Klaas Knot said that recent inflation data pointed to the need to slow stimulus down. Member Holzmann also reiterated this as he called for a debate on how they end the pandemic-era stimulus.


Sterling steadied on Wednesday close to two-week highs versus the dollar, with the pound taking its cue from other currencies given this week is light on data and Bank of England speakers. Against the euro the pound was also little moved.

Analysts said they saw little immediate movement in the pound versus the euro, which had strengthened on Tuesday after one European Central Bank policymaker was quoted as saying that the bank was in a position to think about dialing back its pandemic-era stimulus.

Key announcements

13:15 – USD: ADP Employment Change (Aug); expected to increase to 613k from previous 330k

15:00 – USD: ISM Manufacturing PMI (Aug); expected to decrease from 59.5 to 58.6

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