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Soft Retail Sales and Empire Report Weigh on Greenback

David Becker

The EUR/USD moved higher on Monday, but remains range bound. A softer than expected U.S. Empire Manufacturing report in tandem with a weaker than expected retail sales ex-auto report weighed on the greenback providing a floor for the EUR/USD currency pair.

Technicals

The EUR/USD rebounded from support on the heels of the weaker than expected retail sales number. The currency pair bounced off short-term support near the 10-day moving average at 1.2318.  Additional support is seen near an upward sloping trend line that comes in near 1.2225.  Resistance is seen near a downward sloping trend line that comes in near 1.2430. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs when the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The fast stochastic also generated a crossover buy signal which points to accelerating positive momentum.

The Empire State headline fell

The Empire State headline fell to 15.8 from 22.5 in March but a lower 13.1 in February, versus a 3-year high of 28.1 last October, while the ISM-adjusted Empire State also fell, to 56.2 from 57.3 in March but a lower 55.0 in February, versus an 11-year high of 57.4 in September. We saw declines in every component but inventories and the workweek, following March gains in every component except employment. We expect an April Philly Fed downtick on Thursday to 21.0 from 22.3 in March and 25.8 in February, versus a 2-year high of 35.3 in February of 2017. The ISM-adjusted average of the major producer sentiment surveys looks poised to slip to 57 from a 58 cycle-high in February and March that was also seen in December, and previously in both September and October, versus 57 in January and November. We still expect GDP growth of 2.4% in Q1 and 3.6% in Q2, following rates of 2.9% in Q4, 3.2% in Q3 and 3.1% in Q2. We expect industrial production growth of 3.6% in Q1 and 3.5% in Q2, after a 7.7% clip in Q4, a hurricane-depressed -1.5% pace in Q3, and a 5.0% rate in Q2.

U.S. retail sales increased

U.S. retail sales increased 0.6% compared to expectations of a rise of 0.4% in March with the ex-auto sales up 0.2%, which was softer than expected. The better than expected headline figure broke a string of three monthly declines. The 0.1% dip in February sales was not revised (January was bumped down to -0.2% from -0.1%). There was no revision on the February 0.2% ex auto gain with January left at 0.1%. Excluding autos, gas, and building materials sales rose a solid 0.4% from 0.1% and is the best since November. Motor vehicles and parts climbed 2.0% from -1.3% which was revised from -0.9%. Gas station sales dipped 0.3% from 0.1% which was revised from -1.2%. Building materials fell 0.6% from 2.0% which was revised form 1.9%. Non-store retailer’s sales increased 0.8% after the prior 0.9% gain which was revised from 1.0%. Sporting goods sales dropped 1.8% after the prior 3.3% gain which was revised from 2.2%.

Deutsche Bank reportedly asked to do “wind down cost review” on ECB request. German newspapers today picked up a Reuters source story from Sunday, which said the ECB asked the Deutsche Bank to calculate investment banking exit costs. Germany’s Sueddeutsche reported that the exercise has been going on for some months and that this is the first of its kind. The paper stressed that other banks are set to follow, but also speculated that it may not be an accident that the ECB is making the start with Deutsche Bank and on a day without key data releases and markets treading water the story is making some headlines, with Deutsche Bank CFO now saying in an interview now stressing that “there is no novelty about the exercise per se”. Modelling the wind-down of viable businesses has been required by U.S. and U.K. regulators for years, although CFO James von Moltke said the exercise for the ECB will be “broader in scope” than previous ones.

This article was originally posted on FX Empire

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