Dollar to Decline vs. Yen if US Retail Sales Data Disappoints

DailyFX

The US Dollar is likely to correct lower against the Japanese Yen if a disappointing Retail Sales report dents expectations of an earlier unwinding of Fed stimulus.

Talking Points

  • US Dollar May Fall vs. Yen if Retail Sales Data Disappoints
  • Euro to Take Cues from Eurozone Finance Ministers’ Meeting
  • Australian Dollar Sinks on Swan Comments, China Data Set

An uneventful economic calendar in European trading hours turns the spotlight on April’s US Retail Sales report. Expectations call for receipts to decline 0.3 percent, marking the second consecutive print in negative territory. Despite a handful of recent upside surprises, US economic news-flow has tended to underperform relative to consensus forecasts since late March. This hints analysts continue to overestimate the health of the world’s largest economy and opens the door for a downside surprise. Such an outcome is likely to weigh against bets on a tapering of Federal Reserve stimulus efforts. This threatens to apply downward pressure to the US Dollar, particularly against the Japanese Yen where the greenback enjoys a yield advantage.

Separately, Eurozone Finance Ministers are due to meet in Brussels. Progress on the formation of a region-wide banking union with an eye to allow for direct recapitalization of financial institutions through the EFSF/ESM bailout funds is likely to feature prominently on the agenda. Extensions of rescue loan repayment terms for Ireland and Portugal and the approval of the latest tranche of Greek funding are also on the docket. Eurogroup leader Jeroen Dijsselbloem and EU Commissioner Olli Rehn are expected to hold a press conference after the sit-down and traders will parse their commentary for policy guidance. Signs of meaningful progress may offer a lift to the Euro.

The Australian Dollar underperformed in overnight trade as Treasurer Wayne Swan warned that the currency’s strength amounted to an “unprecedented whack” to revenue and led to the government’s “big decision to delay [its] return to surplus.” A narrowly disappointing set of Chinese economic data compound downward pressure. The currency slid as much as 0.4 percent against its leading counterparts.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:14

NZD

REINZ Housing Price Index (APR)

3661.5

-

3631.4

22:14

NZD

REINZ Housing Price Index (MoM) (APR)

0.8%

-

2.4%

22:17

NZD

REINZ House Sales (YoY) (APR)

25.2%

-

10.9%

22:45

NZD

Food Prices (MoM) (APR)

0.2%

-

-1.3%

23:50

JPY

Japan Money Stock M3 (YoY) (APR)

2.6%

2.5%

2.5%

23:50

JPY

Japan Money Stock M2 (YoY) (APR)

3.3%

3.1%

3.1%

1:30

AUD

Value of Loans (MoM) (MAR)

5.8%

-

1.2%

1:30

AUD

Home Loans (MAR)

5.2%

4.0%

2.1%

1:30

AUD

Investment Lending (MAR)

2.1%

-

1.9%

1:30

AUD

NAB Business Conditions (APR)

-6

-

-7

1:30

AUD

NAB Business Confidence (APR)

-2

-

2

1:30

AUD

RBA Credit Card Purchases (MAR)

A$20.2B

-

A$20.2B

1:30

AUD

RBA Credit Card Balances (MAR)

A$49.7B

-

A$50.0B

5:30

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (APR)

20.6%

21.0%

20.9%

5:30

CNY

Industrial Production YTD (YoY) (APR)

9.4%

9.5%

9.5%

5:30

CNY

Industrial Production (YoY) (APR)

9.3%

9.4%

8.9%

5:30

CNY

Retail Sales YTD (YoY) (APR)

12.5%

12.6%

12.4%

5:30

CNY

Retail Sales (YoY) (APR)

12.8%

12.8%

12.6%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:30

EUR

Bank of France Business Sentiment Indicator (APR)

94 (A)

93

Low

7:15

CHF

Retail Sales – Real (YoY) (MAR)

-0.9% (A)

2.4%

Low

13:00

EUR

Euro Zone Finance Ministers Meet in Brussels

-

-

High

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2877

1.3048

GBPUSD

1.5295

1.5439

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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