Franc and Yen Aim Higher as European Politics Sour Market Mood

TALKING POINTS – SWISS FRANC, YEN, POUND, BREXIT, KRONA, SWEDEN

• Franc and Yen rise as European politics undermine risk appetite
• Pound down as Brexit talks stall, Sweden coalition-building fails
• Upbeat US retail sales statistics may amplify risk-off momentum

The Swiss Franc outperformed as worries about EU politics soured sentiment at the start of the trading week. The likewise anti-risk Japanese Yen was not far behind. Brexit talks appeared to stall, souring recent hopes for an imminent breakthrough and sinking the British Pound. Meanwhile, coalition-building efforts failed in Sweden, underscoring yet another pocket of EU-linked instability and punishing the Krona.

SENTIMENT MAY SOUR FURTHER, US RETAIL SALES ON TAP

Looking ahead, a quiet offering on the European data docket hints sentiment is likely to remain at the forefront. That seems to leave moves seen in Asia Pacific trade with room for follow-through. The bellwether S&P 500 index futures are pointing substantively lower before bourses in Europe and North America come online, hinting that a risk-off bias will continue to prevail.

That may be amplified by September’s US retail sales statistics. They are expected to show that receipts added 0.6 percent, broadly returning to trend average after a tepid 0.1 percent gain in August. Leading PMI data bolsters the case for an upbeat result, as does a recent improvement in broad-based US data outcomes relative to baseline forecasts.

Worries about the pace of Federal Reserve interest rate hikes were at the heart of last week’s brutal market rout. To the extent that firm US economic news-flow underpins policymakers’ hawkish stance, it may – perhaps somewhat counterintuitively – weigh on risk appetite. Meaningful follow-through on this narrative might have to wait for Wednesday’s release of minutes from September’s FOMC meeting however.

ASIA PACIFIC TRADING SESSION

EUROPEAN TRADING SESSION

** All times listed in GMT