North Korea Fires Another across the Bow with the USD and U.S Retail Sales in Focus this Afternoon

Earlier in the Day:

It was going to be a pretty quiet end to the week for the Asian markets, with key stats out of Asia being limited to New Zealand’s Business PMI figures for August, which showed a pickup in the pace of manufacturing activity, easing some degree of concern over the New Zealand economy, with an solid gain in production figures accompanied by particularly strong new orders. The upbeat numbers did little for the Kiwi Dollar however, which moved from $0.7223 to $0.72287 upon release, the markets.

The Headline for the Asian session was undoubtedly news of yet another North Korean ballistic missile test, which comes in the wake of the UN rolling out more stringent sanctions at the start of the week in response to the country’s nuclear advancements and continued attempts to threaten world peace with the ongoing testing of intercontinental ballistic missiles. Adding to the tension will have been North Korea’s comments in the week, saying that it would reduce the U.S mainland into ashes and sink Japan into the sea with a nuclear strike.

Unsurprisingly, gold was on the rise through the session, with gold gaining 0.31% to sit at $1,333.4, with any hopes of a Dollar rebound on pause as the markets take their almost weekly positions, ahead of an emergency UN Security Council Meeting.

This time around there will be reasonable cause for concern, with the UN and global leaders likely to now be considering alternative measures, Kim Jong-Un clearly defiant and seemingly only interested in war.

The Day Ahead:

Following a pretty hectic week for the Pound, culminating in a particularly hawkish BoE, there are no material stats out of the UK this morning to provide further direction as the markets begin to consider when the BoE will make its move, leaving the EUR and the Dollar in focus through the European and U.S sessions.

Macroeconomic data out of the Eurozone is limited to July’s trade balance and 2^nd quarter wages, both of which will be considered particularly relevant to the EUR under normal market conditions. Wage growth has been lacking and for the ECB to be confident in its desire to shift on monetary policy, wage growth is certainly one of the weak links.

While the stats are unlikely to be bullish for the EUR, North Korea’s latest missile test will muddy the waters through the day as the markets respond, ahead of stats out of the U.S, which are on the heavier side.

U.S August inflation figures caught the markets napping on Thursday, with the Dollar on the bounce as inflation came in ahead of forecasts, suggesting that members of the FOMC may be more divided on a final rate hike before the end of the year than initially forecasted. Focus this afternoon will be on U.S retail sales figures for August, which will also need to impress for the FOMC to deliver hawkish economic projections next week and provide further support for the Dollar.

Other stats out of the U.S include September’s New York State Manufacturing PMI, prelim Michigan Consumer Sentiment and Expectations figures, August industrial production and July business inventory numbers. Barring any dire numbers, it’s going to boil down to the retail sales figures and the U.S response to the latest North Korea missile test, any overly aggressive response from the U.S likely to weigh heavily on the Dollar.

In what was another record breaking week for U.S equities, U.S futures are in the red and the safe haven play will be in full effect going into the weekend, few in the markets likely to be wanting to take on positions with what could be quite a tense weekend on the diplomatic front.

China will need to begin considering the harsh reality that the North Korean’s have little interest in world peace and there will be some embarrassment to the Chinese government, who have attempted to mediate and favour a softer approach.

Risk aversion through the day has eased, with the U.S remaining quiet ahead of today’s emergency UN Security Council meeting, with the Dollar bouncing from early losses against the Yen, up 0.44% at ¥110.72 at the time of writing, while the EUR was down 0.03% at $1.19154 ahead of today’s stats

The story of the week will be the resurgence of the Pound, which has recovered to $1.34 levels, as the BoE continues to flip flop on monetary policy, this time in favour of the Pound.