Dollar Hits 2-Month Low vs. Yen, Eyes Retail Sales Data for Help
The US Dollar looks to May’s Retail Sales report for Fed stimulus reduction clues after hitting a two-month low against the Japanese Yen amid risk aversion.
Talking Points
Yen Soars, Aussie and Kiwi Dollars Drop as Risk Aversion Strikes in Asia
Markets Look to May’s US Retail Sales Data to Guide Fed QE Taper Bets
The Japanese Yen outperformed while the yield-sensitive Australian and New Zealand Dollars plunged on the back of carry trade liquidation and flight-to-safety capital flows as risk aversion struck Asian markets anew. The MSCI Asia Pacific benchmark stock index fell nearly 3 percent en route to setting a year-to-date low. Japan’s shares again led the way lower among the region’s major bourses, with the Nikkei 225 shedding a staggering 6.35 percent.
The rout followed a dismal day on Wall Street that was compounded as the World Bank downgraded its economic growth outlook. The international lender said global recovery is “hesitant and uneven”, trimming its 2013 GDP expansion forecast to 2.2 percent from 2.4 percent predicted in January. The Kiwi bore the brunt of the selloff after the RBNZ said it intends to keep interest rates unchanged through the rest of the year despite expectations of rising trend in CPI inflation.
Looking ahead, all eyes are on May’s US Retail Sales report. Expectations call for receipts to rise 0.4 percent, marking an improvement from the 0.1 percent increase recorded in the prior month. Traders will interpret the outcome in terms of its implications for the timing of a cutback in the size of the Federal Reserve’s monthly asset purchases.
A strong outcome is likely to stoke expectations for a relatively sooner cutback in stimulus efforts, offering support to the US Dollar against most its major counterparts. USDJPY and to some extent USDCHF may prove to be exceptions as the negative risk appetite implications of a less accommodative FOMC weigh down the sentiment-linked pairs. Needless to say, a soft result will probably produce the opposite dynamic.
Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index
Asia Session:
GMT | CCY | EVENT | ACT | EXP | PREV |
21:00 | NZD | Reserve Bank of New Zealand Rate Decision | 2.50% | 2.50% | 2.50% |
1:00 | AUD | Consumer Inflation Expectation (JUN) | 2.3% | - | 2.3% |
1:30 | AUD | Employment Change (MAY) | 1.1K | -10.0K | 45.0K |
1:30 | AUD | Unemployment Rate (MAY) | 5.5% | 5.6% | 5.5% |
1:30 | AUD | Part Time Employment Change (MAY) | 6.4K | - | 15.3K |
1:30 | AUD | Full Time Employment Change (MAY) | -5.3K | - | 29.8K |
1:30 | AUD | Participation Rate (MAY) | 65.2% | 65.2% | 65.3% |
1:30 | JPY | BOJ’s Shirai Holds Press Conference | - | - | - |
Euro Session:
GMT | CCY | EVENT | EXP/ACT | PREV | IMPACT |
6:00 | EUR | German Wholesale Price Index (YoY) (MAY) | -0.1% (A) | -0.4% | Low |
6:00 | EUR | German Wholesale Price Index (MoM) (MAY) | -0.4% (A) | -0.2% | Low |
7:15 | CHF | Producer & Import Prices (YoY) (MAY) | -0.2% (A) | -0.1% | Low |
7:15 | CHF | Producer & Import Prices (MoM) (MAY) | -0.3% (A) | 0.2% | Low |
8:00 | EUR | ECB Publishes Monthly Report | - | - | Medium |
Critical Levels:
CCY | SUPPORT | RESISTANCE |
EURUSD | 1.3283 | 1.3414 |
GBPUSD | 1.5605 | 1.5709 |
--- 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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