Overall dollar weakness is driving the currency markets this morning as the missile strike in Syria was largely treated as an isolated incident by investors and U.S. retail sales data came out mixed.
Another day, another missile strike
The markets haven’t had much reaction to the combined military action by the United States, United Kingdom and France in Syria over the weekend. The attack is said to have weakened Russia-backed leader Bashar al-Assad’s ability to use chemical weapons.
President Trump proclaimed “mission accomplished” on Twitter after the attack. There has yet to be any major political fallout from the air strike and a Russian response is still pending.
The dollar’s weakness allowed the pound and the euro to gain over the weekend. The euro is at its strongest point against the dollar in three weeks. Sterling is hitting its highest point since June 2016.
U.S. Ambassador to the U.N. Nikki Haley said the U.S. will announce more sanctions against Russia today, targeting companies that were dealing with the equipment related to al-Assad’s chemical weapons.
Retail-sales revision dampens March win
Despite a better-than-expected month-over-month result of 0.6% for March retail sales, market reaction to the data was dragged down by a revision to the February numbers.
The February control group was revised from 0.1% to flat. For March, the control group met expectations of 0.4% and retail sales excluding autos also met expectations of 0.2%.
The mixed data allowed the euro and the pound to hold onto their gains.
EUR/USD was trading around 1.239 Monday morning. GBP/USD held onto 1.43 after the data release, trading around 1.432.
Optimism in the U.K.
The sterling’s recent gains are not just due to dollar weakness. There is more optimism around the U.K. economy and the pound since the Brexit transition deal was signed in March.
GBP/USD is hitting its highest point in 22 months, trading around 1.432.
The pound has been driven by political sentiment so far this year, but the transition deal may allow economic data to be the focus for investors – at least in the next few months. This week, the U.K. will see readings for three important economic indicators: wages (Tuesday), inflation (Wednesday) and retail sales (Thursday).
These could all have an impact on the Bank of England’s May meeting and the likelihood of a rate hike.
USD/JPY holds onto 107 despite yen gains
The Japanese yen rose against the dollar, building off of new polls that show the support for Japanese Prime Minister Shinzo Abe is falling.
Abe and his wife are at the center of a cronyism involving a government land sale involving a government land sale.
USD/JPY is trading around 107.3, slightly lower after the mixed U.S. retail sales data. The pair struggled to hold above 107 earlier last week and then hit a two-month high of 107.6 on Friday off of easing tensions around global trade.
Potential Syria fallout could boost the safe-haven yen, otherwise we’ll look to economic data for new direction, including Japanese inflation data Thursday night.