Hopes were high heading into today’s US Retail Sales report, with analysts expecting that the primary measure of the consumers’ health would bounce back to 1.0% m/m after three consecutive declines of more than -0.5%. As it turns out, retail sales did show some improvement, but still managed to disappoint USD bulls by printing at 0.9% m/m. Perhaps more importantly, the “Core” Retail Sales figure, which filters out automobile purchases, came out at just 0.4% m/m, missing expectations of a 0.7% rise. Meanwhile, the US Producer Price Index (PPI) reading for March also came out slightly below expectations at just 0.2% m/m vs. 0.3% eyed.
As the Federal Reserve has pounded into every traders’ head by now, the central bank remains highly “data dependent.” While today’s US economic reports showed improvement over the dark, cold winter months, the recovery remains slow and fragile, and for that reason, we remain highly skeptical that the Fed will raise interest rates in the first half of the year.
Technical View: EURUSD
As you would expect, this morning’s (slightly) disappointing data releases have taken the wind out of dollar bulls’ sails, and the greenback is trading down by around 50 pips across the board. In case you missed it, we covered the technical outlook for EURUSD yesterday, concluding that, “the key level to watch will be 1.0500, which approximates the mid-March low in addition to representing a key area of psychological support” (see “EUR Not Going Believe This, but EURUSD is Trading Down Again Today”). With today’s bounce, EURUSD looks likely to hold the 1.0500 floor in the near-term, but traders are already starting to turn their attention to tomorrow’s ECB meeting. See our full ECB preview for the key factors to watch in ECB President Draghi’s press conference.