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Retail Sales bump helps dollar higher

USD

The dollar rose on Thursday after Retail Sales came out higher-than-expected in May, adding fuel to speculation that the Fed might raise rates early, as at least one voting member of the FOMC has expressed their desire to see an increase in Consumer Spending before ‘pressing the button’.

Retail Sales rose 1.2% in May, from 0.2% (revised up from 0.0%) in the previous month; the result beat analyst’s estimates of a rise of 1.1%. Retail Sales less cars rose by 1.0% versus 0.1% prior and 0.8% expected.

Sales in Petrol Stations registered the highest rise, increasing by 3.7% – perhaps as a result of the fall in oil prices – with Garden Equipment next, increasing 2.1%. All-bar-one of the thirteen sectors showed a rise.

Other data showed a rise in Initial Jobless Claims to 279k from 277k previously, when a fall to 275k had been expected. Continuing Claims also rose by 61k to 2265k from 2204k previously, when a fall 2190k had been estimated.

Business Inventories in April increased by a higher-than-expected 0.4% – beating the 0.2% expected and the 0.1% previously.

EUR

The euro weakened on Thursday as a result of the continued impasse in Greek cash-for-reform negotiations.

The single currency was particularly hit by news that the IMF had quit negotiations out of frustration that the Greek government would not soften its stance. News was quite mixed, however, with some officials saying a deal was now only days away – and others more gloomy.

Investors are concerned that there will be a Grexit and a default at the end of June when the current bailout aid programme expires and Greece is required to pay back the IMF’s 1.6bn loan.

Otherwise it was a quiet day with no major data from the Euro-zone.

GBP

The pound rose marginally on Thursday after trading remained subdued amidst a lack of data for most currencies – apart from the dollar, that is, which increased after Retail Sales beat estimates in May.

The Chancellor of the Exchequer announced that he was selling the government’s stake in Royal Bank of Scotland, which it bailed out during the financial crisis. The sale would result in the crystallization of a 7bn loss. Nevertheless it has been calculated that the governments total stake in all British banks if sold, would actually generate a 15bn profit, which was more that the chancellor at the time of the crisis, Alistair Darling had forecast.

The money will contribute to eradicating the budget deficit, which the government is keen to balance as soon as possible. Markets were mildly positive following the release of the news.

The pound may also have been supported by comments the chancellor made about Europe in which he argued that the U.K needed to try to renegotiate its place in a two-stream Europe, with the euro and non-euro countries treated differently, and the latter (including the U.K) having much looser ties to the E.U. His comments, which were broadly pro-euro and for the U.K staying in, may have helped to allay fears investors had of a Brexit.

JPY

The yen lost ground slightly against the dollar as it corrected itself after Wednesday’s over reaction to the BOJ’s assertion that the currency was ‘unlikely’ to weaken further. the yen was trading at 123.56 per dollar late in the New York session.

A person close to the Japanese government suggested Thursday that Prime Minister Abe’s administration was displeased with Governor Kuroda’s remarks and considered them ‘careless’. Japanese Finance Ministry officials take a dim view of comments made by the central bank that cause currency fluctuations.

A survey conducted among Japan’s large scale factories showed a strong deterioration in the nation’s manufacturing activity in the second quarter. A solid recovery ,however, is expected in the upcoming quarter.

The Business Survey Index plunged from 2.4 in the March quarter to -6.0 in the reported period. A reading above zero signals optimism, while a negative reading indicates pessimism. Businesses surveyed evaluated domestic economic conditions as less favourable in the three months through June than the previous quarter. They anticipate an amelioration in the following quarter.

Employment conditions were also weaker this quarter compared to the March quarter, but are predicted to weaken further in the following two quarters. Sales and ordinary profits were seen accelerating in the second half of fiscal 2015, but investment plans were expected to moderate sharply.

“Core consumer spending fell to its lowest level since last summer in April, and industrial output may well have contracted this quarter. We therefore expect a sharp slow-down in GDP growth,” said Marcel Thielant ,Capital Economics.

USD

The dollar rose on Thursday after Retail Sales came out higher-than-expected in May, adding fuel to speculation that the Fed might raise rates early, as at least one voting member of the FOMC has expressed their desire to see an increase in Consumer Spending before ‘pressing the button’.

Retail Sales rose 1.2% in May, from 0.2% (revised up from 0.0%) in the previous month; the result beat analyst’s estimates of a rise of 1.1%. Retail Sales less cars rose by 1.0% versus 0.1% prior and 0.8% expected.

Sales in Petrol Stations registered the highest rise, increasing by 3.7% – perhaps as a result of the fall in oil prices – with Garden Equipment next, increasing 2.1%. All-bar-one of the thirteen sectors showed a rise.

Other data showed a rise in Initial Jobless Claims to 279k from 277k previously, when a fall to 275k had been expected. Continuing Claims also rose by 61k to 2265k from 2204k previously, when a fall 2190k had been estimated.

Business Inventories in April increased by a higher-than-expected 0.4% – beating the 0.2% expected and the 0.1% previously.

EUR

The euro weakened on Thursday as a result of the continued impasse in Greek cash-for-reform negotiations.

The single currency was particularly hit by news that the IMF had quit negotiations out of frustration that the Greek government would not soften its stance. News was quite mixed, however, with some officials saying a deal was now only days away – and others more gloomy.

Investors are concerned that there will be a Grexit and a default at the end of June when the current bailout aid programme expires and Greece is required to pay back the IMF’s 1.6bn loan.

Otherwise it was a quiet day with no major data from the Euro-zone.

GBP

The pound rose marginally on Thursday after trading remained subdued amidst a lack of data for most currencies – apart from the dollar, that is, which increased after Retail Sales beat estimates in May.

The Chancellor of the Exchequer announced that he was selling the government’s stake in Royal Bank of Scotland, which it bailed out during the financial crisis. The sale would result in the crystallization of a 7bn loss. Nevertheless it has been calculated that the governments total stake in all British banks if sold, would actually generate a 15bn profit, which was more that the chancellor at the time of the crisis, Alistair Darling had forecast.

The money will contribute to eradicating the budget deficit, which the government is keen to balance as soon as possible. Markets were mildly positive following the release of the news.

The pound may also have been supported by comments the chancellor made about Europe in which he argued that the U.K needed to try to renegotiate its place in a two-stream Europe, with the euro and non-euro countries treated differently, and the latter (including the U.K) having much looser ties to the E.U. His comments, which were broadly pro-euro and for the U.K staying in, may have helped to allay fears investors had of a Brexit.

JPY

The yen lost ground slightly against the dollar as it corrected itself after Wednesday’s over reaction to the BOJ’s assertion that the currency was ‘unlikely’ to weaken further. the yen was trading at 123.56 per dollar late in the New York session.

A person close to the Japanese government suggested Thursday that Prime Minister Abe’s administration was displeased with Governor Kuroda’s remarks and considered them ‘careless’. Japanese Finance Ministry officials take a dim view of comments made by the central bank that cause currency fluctuations.

A survey conducted among Japan’s large scale factories showed a strong deterioration in the nation’s manufacturing activity in the second quarter. A solid recovery ,however, is expected in the upcoming quarter.

The Business Survey Index plunged from 2.4 in the March quarter to -6.0 in the reported period. A reading above zero signals optimism, while a negative reading indicates pessimism. Businesses surveyed evaluated domestic economic conditions as less favourable in the three months through June than the previous quarter. They anticipate an amelioration in the following quarter.

Employment conditions were also weaker this quarter compared to the March quarter, but are predicted to weaken further in the following two quarters. Sales and ordinary profits were seen accelerating in the second half of fiscal 2015, but investment plans were expected to moderate sharply.

“Core consumer spending fell to its lowest level since last summer in April, and industrial output may well have contracted this quarter. We therefore expect a sharp slow-down in GDP growth,” said Marcel Thielant ,Capital Economics.



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