INR: USDINR Hits Fresh Record High, Prompting Renewed Intervention Speculation

Of note:

USDJPY 2.38bn at 148.65/149.00 (a bit far).

AUDUSD 1.01bn at 0.6550 (a bit far).

USDCAD ~2bn at 1.3770/1.3775 (could act as magnet).

EURUSD 1.94bn at 1.1600 (thu).

USDJPY 1.52bn at 147.00 (fri).

• EURUSD: 1.1500 (613mln), 1.1510 (260mln), 1.1525 (830mln), 1.1550 (942mln), 1.1600 (330mln).
• USDJPY: 148.00 (481mln), 148.25 (230mln), 148.30 (819mln), 148.50 (547mln), 148.65 (1.1bn), 149.00 (1.28bn).
• USDCAD: 1.3770 (769mln), 1.3775 (1.25bn).
• AUDUSD: 0.6500 (463mln), 0.6525 (296mln), 0.6530 (236mln), 0.6550 (1.01bn).

German retail sales printed stronger then consensus in June, at 1.0% M/M (0.5% cons; -0.6% prior, note that that was revised from -1.6%, underpinning the strength seen in June). Nonetheless, this means that on a 3m/3m comparison, retail sales printed a mere +0.3% in Q2, which is likely not enough to carry any strong signal for a Q2 GDP consumer spending contribution. German headline Q2 GDP is to be released today at 09:00 BST / 10:00 local time (consensus is for -0.1% Q/Q following the comparatively strong 0.4% in Q1).

• From a sentiment perspective, the consumer sector in Germany appears to be lacking in momentum vs the supply side of the economy. GfK consumer sentiment continued to print in clearly negative territory as the fiscal measures of the government appear to be filtering through to business optimism but not consumers properly.
• The public mood remains negative despite recent rises in net wages, while small companies remain in crisis mode after two very bad years, German economist Achim Wambach said in a recent MNI exclusive. “Even those consumers who are relatively happy with their own circumstances think the economy is in trouble. If next year we see some more growth then the positive moods will also come back to consumption.”
• Despite the negative sentiment, on a Y/Y comparison, the retail sales series is posting solid gains at +4.9% (even if last June was particularly weak, underpinning that figure; compares to May's 2.6% Y/Y).
• Non-food sales drove today's release, at +1.8% M/M. Internet and mail sales were up in particular, at +9.0%. Food sales printed 0.3% m/m, meanwhile.

Gilts firm early on, taking cues from post-7-Year auction price action in U.S. Tsys as opposed to the two-way, non-committal start for Bunds.

• Futures through yesterday’s high, bulls test Monday’s best levels, with the contract topping out at 91.86 for now.
• Note that the contract has pierced the 20-day EMA (91.82). A move higher would target the July 22 high (92.15). Well-defined key support comes in at the July 18 low (91.08).
• Yields 2-3bp lower, parallel shift across the curve.
• 2s10s and 5s30s remain in fairly close proximity to 75bp and 140bp, respectively, trading back from ’25 highs, but consolidating the bulk of the year-to-date steepening.
• Fundamentals (potential for a deeper BoE easing cycle vs. market pricing, fiscal fragility and tepid economic growth) point to further steepening risks, although a more activist approach from policymakers (both the DMO & BoE) when it comes to preventing spikes higher in long end yields presents a risk to that idea. As does pre-existing steepener positioning.
• BoE-dated OIS continues to show ~46bp of cuts through year-end.
• Little of note on the UK data calendar today, which will leave focus on EUR data (Eurozone GDP) ahead of the FOMC decision & U.S. GDP data.
• On the issuance side, the DMO will tender GBP300mln of the 3.75% Jul-52 gilt.