The US dollar maintained some of its latest gains as the dollar index was above 95 at 95.19 versus a low around 94.4 it hit on Wednesday. Positive retail sales numbers for May, announced the previous day, helped support the dollar.
Headline retail sales were up 1.2% month-on-month during May, higher than the consensus of a Reuters’ poll of a 1.1% gain. Excluding automobiles, parts and gas, the figure was significantly stronger than consensus, at 1.0% actual versus 0.7% expected, whereas the Retail control indicator, which is close to the number used for consumption in the GDP calculation, was 0.7%. Not only were May figures upbeat but also April figures were upwardly revised which bodes overall well for 2nd quarter GDP given the huge importance of consumption in the economy. It appeared that a strong employment market, lower gasoline prices compared to last year and wages that were starting to show at least a modest pickup were having a positive effect on retail sales.
The dollar managed to gain a little against the yen at 123.53, whereas the pound remained relatively strong at 1.5510 versus the greenback. Some traders speculated that fresh dollar longs might be dangerous before such a major risk event like next week’s Federal Open Market Committee meeting, where important guidance with respect to US interest rate changes could be given.
One currency that the dollar did manage to push back more was the euro, as there were negative developments in the negotiations between Greece and its creditors. The International Monetary Fund decided to pull its team out of the negotiations as significant differences remained between the creditors and Greece. The IMF would remain engaged, but this development clearly showed that negotiations were not close to producing an agreement. The immediate impact on the euro was not so significant and the euro has been quite volatile recently – moving in close lockstep with the changes in bund yields. The euro was trading around 1.1234 versus above 1.13 at the close of Thursday’s Asian session.
Looking ahead, UK construction output for April and Eurozone Industrial production for the same month will be the main items to watch for during the European session. Later on, May Producer Prices out of the United States but more importantly, preliminary University of Michigan Consumer Sentiment for June will be key for gauging consumer attitudes as the US economy wraps up the second quarter.