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By xemarketanalysis May 18, 2017 11:26 am
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    XE Market Analysis: Pound Jumps to an 8-Month High

    OVERVIEW

    • Risk aversion remains the main theme in markets which have reacted negatively to news of a special counsel investigation on Russian interference in the US presidential election.
    • European stock markets are down around 1% after US stock markets suffered their biggest daily declines since Donald Trump's victory. 
    • The number of Americans receiving unemployment aid hit a 28 in a half year low, pointing to rapidly shrinking labor market slack.
    • The ECB minutes signaled the central bank will consider very carefully any communication shifts when it meets next month to prevent undue market turbulence. 
    • Japan's economy grew at an annualized pace of 2.2% in the first quarter, exceeding market forecasts and the fastest pace in a year. 
    • Unemployment in Australia fell unexpectedly to 5.7% last month as the economy added a much stronger than expected 37,400 jobs. 
    • Brazil's current president, Michael Temer, has been accused of authorizing "hush money" to be paid to imprisoned former house speaker Eduardo Cunha. 

    HIGHLIGHT

    The British Pound hit an 8-month high of 1.3047 in the European session, following the release of much stronger than expected retail sales data. Retail sales jumped 2.3% in April, more than double market forecasts, that is easing concerns that rising inflation will dent consumer’s willingness to spend.

    US DOLLAR

    The Dollar has stabilized at lower levels supported by the strong unemployment claims and the Philly Fed survey which showed activity jumped more than expected in May. The storm surrounding the White House is showing few signs of abating and the latest development further risks overshadowing the Trump administration's agenda. Risks appear to point to the Dollar for now. 

    BRITISH POUND

    The Pound is off its highs for the session (see highlight), but is holding above 1.30. Key support remains at 1.2850 and the next major resistance point is 1.35.

    EURO

    The Euro is marginally lower on the day versus the US Dollar having hit a fresh 6-month high overnight but is marginally higher elsewhere. The market is positioned for stronger Euro-zone growth, and a shift in forwarding guidance from the ECB next month, so the current rally may start to run out of steam without fresh impetus. 

    CANADIAN DOLLAR

    The Loonie is once again testing the layers of resistance below 1.36 in USD/CAD, with oil prices having recovered a steep decline in the European session. Retail sales and CPI data will give investors some domestic Canadian data to focus on. 

    AUSTRALIAN DOLLAR

    The Aussie Dollar is attempting reverse to its 6-week downwards trend channel with a move above 0.75 cents. Today's employment data will provide some relief to the RBA that the labor market is improving, even if wage growth remained at a record low in the first quarter. 

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