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    Lack of growth in Retail Sales pushes dollar even lower

    USD

    Data showing zero growth in Retail Sales in April weighed on the dollar on Wednesday after it raised the possibility the Fed might decide to delay its tightening schedule until later in the year or even 2016.

    Advance Retail Sales came out at 0.0% yoy, undershooting the 0.2% expected and the 1.1% recorded a year ago in 2014.

    Retail Sales less autos came out at 0.1% – falling well below the previous month’s 0.7% and failing to hit analyst’s forecasts of 0.5%.

    The poor data raised concerns Q2 might be just as poor as Q1 was, and if so that would contradict the assumption that Q1 was a temporary ‘blip’.

    At least one Fed voting member, Dennis Lockhart, has said he wants to see a rise in Consumer Spending before the next rate hike, however, today’s data will not be an encouraging sign that that has happened, at least for him.

    EUR

    Euro-zone first quarter GDP data dominated FX trader’s attention on Wednesday and showed robust growth, which fell in line with analyst’s optimistic expectations, showing a 0.4% rise qoq, and .1.0% yoy, the former representing the fastest growth in the region for four-years and the latter for two-years.

    In addition the figures showed the majority or ‘pack’ of euro-zone economies catching up with the leader Germany, which actually failed to meet forecaster’s estimates; France and Italy however, met or exceeded growth expectations.

    Other key data on Wednesday included German CPI, E.U Harmonised, final estimate, for April, which came out at 0.3%, the same as previously and as forecast. This helped improve expectations for Euro-zone CPI, when it is scheduled for release next week.

    GBP

    The pound traded mixed on Wednesday after mixed data, which on the one hand showed a rise in earnings and fall in the Unemployment Rate – but crucially showed the BOE revising down growth forecasts for the year, from 2.9% to 2.5%, after it broke its 6-week pre-election ‘curfew’ of silence, publishing the quarterly inflation report on Wednesday.

    Sterling continued to rise versus the dollar but halted against the euro, which was supported by a steadily metamorphosing economic outlook for the region.

    U.K employment data showed Average Weekly Earnings, which are critical in the BOE’s policy decision-making process unexpectedly rising 1.9%, 3-month on year in March, compared to the 1.7% previously and 1.7% investors had been expecting. Earnings Ex Bonus rose by 2.2% from 1.9% when 2.1% increase had been forecast.

    The Unemployment Rate fell to 5.5% from 5.6% in line with estimates.

    Employment Change, 3-month-on-3-month in March, however, failed to reach the 225k expected, rising by a lesser 202k instead, and well down from the previous 248k.

    The inflation report was considered doveish and included aforesaid downward revision in growth. The Bank said Productivity remained too low to warrant sharper growth. Overall Carney was cautious in the Q&A. The pound took a tumble after the inflation reports release.

    JPY

    The current account data released Wednesday morning was better-than-expected, helping to support the yen which strengthened some 80 points during the day trading at 119.09 mid-way through the New York session.

    The surplus in the current account, is the broadest measure of Japan’s trade with the rest of the world. The surplus in the current account was 2.8tr yen in March, the Ministry of Finance reported, expanding from 1.44tr yen in February. Economists had expected 2.06tr yen surplus in March.

    A cheaper import bill due to tumbling oil prices, coupled with with an inflow of tourists due to a weaker yen and rising income from investments abroad by Japanese companies helped increase the surplus. The boost assisted the Japanese economy that is weighed down by weak spending by consumers and businesses at home.

    Economists believe that the current account surplus is likely to remain at a high level in the foreseeable future, even if it comes down from March’s high, though they express doubt on whether there could be any further rise in the size of the surplus. Current account surpluses are typically larger in March due to seasonal factors.

    Exports surged almost 10% yoy in March to 7.4tr yen, while imports plummeted more than 15% over the same period to 6.47tr yen. Japan’s services balance swung into surplus by 167bn yen in March from February’s 108bn yen deficit.

    Traders can expect the yen could weaken further by year-end, which should lift the surplus in the primary income balance. Overall economists think that the current account surplus should rebound from 0.5% of GDP in 2014 to 2.5% this year , the highest since 2010.

    USD

    Data showing zero growth in Retail Sales in April weighed on the dollar on Wednesday after it raised the possibility the Fed might decide to delay its tightening schedule until later in the year or even 2016.

    Advance Retail Sales came out at 0.0% yoy, undershooting the 0.2% expected and the 1.1% recorded a year ago in 2014.

    Retail Sales less autos came out at 0.1% – falling well below the previous month’s 0.7% and failing to hit analyst’s forecasts of 0.5%.

    The poor data raised concerns Q2 might be just as poor as Q1 was, and if so that would contradict the assumption that Q1 was a temporary ‘blip’.

    At least one Fed voting member, Dennis Lockhart, has said he wants to see a rise in Consumer Spending before the next rate hike, however, today’s data will not be an encouraging sign that that has happened, at least for him.

    EUR

    Euro-zone first quarter GDP data dominated FX trader’s attention on Wednesday and showed robust growth, which fell in line with analyst’s optimistic expectations, showing a 0.4% rise qoq, and .1.0% yoy, the former representing the fastest growth in the region for four-years and the latter for two-years.

    In addition the figures showed the majority or ‘pack’ of euro-zone economies catching up with the leader Germany, which actually failed to meet forecaster’s estimates; France and Italy however, met or exceeded growth expectations.

    Other key data on Wednesday included German CPI, E.U Harmonised, final estimate, for April, which came out at 0.3%, the same as previously and as forecast. This helped improve expectations for Euro-zone CPI, when it is scheduled for release next week.

    GBP

    The pound traded mixed on Wednesday after mixed data, which on the one hand showed a rise in earnings and fall in the Unemployment Rate – but crucially showed the BOE revising down growth forecasts for the year, from 2.9% to 2.5%, after it broke its 6-week pre-election ‘curfew’ of silence, publishing the quarterly inflation report on Wednesday.

    Sterling continued to rise versus the dollar but halted against the euro, which was supported by a steadily metamorphosing economic outlook for the region.

    U.K employment data showed Average Weekly Earnings, which are critical in the BOE’s policy decision-making process unexpectedly rising 1.9%, 3-month on year in March, compared to the 1.7% previously and 1.7% investors had been expecting. Earnings Ex Bonus rose by 2.2% from 1.9% when 2.1% increase had been forecast.

    The Unemployment Rate fell to 5.5% from 5.6% in line with estimates.

    Employment Change, 3-month-on-3-month in March, however, failed to reach the 225k expected, rising by a lesser 202k instead, and well down from the previous 248k.

    The inflation report was considered doveish and included aforesaid downward revision in growth. The Bank said Productivity remained too low to warrant sharper growth. Overall Carney was cautious in the Q&A. The pound took a tumble after the inflation reports release.

    JPY

    The current account data released Wednesday morning was better-than-expected, helping to support the yen which strengthened some 80 points during the day trading at 119.09 mid-way through the New York session.

    The surplus in the current account, is the broadest measure of Japan’s trade with the rest of the world. The surplus in the current account was 2.8tr yen in March, the Ministry of Finance reported, expanding from 1.44tr yen in February. Economists had expected 2.06tr yen surplus in March.

    A cheaper import bill due to tumbling oil prices, coupled with with an inflow of tourists due to a weaker yen and rising income from investments abroad by Japanese companies helped increase the surplus. The boost assisted the Japanese economy that is weighed down by weak spending by consumers and businesses at home.

    Economists believe that the current account surplus is likely to remain at a high level in the foreseeable future, even if it comes down from March’s high, though they express doubt on whether there could be any further rise in the size of the surplus. Current account surpluses are typically larger in March due to seasonal factors.

    Exports surged almost 10% yoy in March to 7.4tr yen, while imports plummeted more than 15% over the same period to 6.47tr yen. Japan’s services balance swung into surplus by 167bn yen in March from February’s 108bn yen deficit.

    Traders can expect the yen could weaken further by year-end, which should lift the surplus in the primary income balance. Overall economists think that the current account surplus should rebound from 0.5% of GDP in 2014 to 2.5% this year , the highest since 2010.


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