Today is Sun, November 19, 2017 13:19:26 GMT
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Contributors Forex: US Dollar to Rise if Data Pickup Extends to Retail Sales Print

Talking Points:

  • Upside Surprise on German ZEW Print Unlikely to Drive Euro Strength
  • US Dollar May Rise vs. Most Majors if Retail Sales Data Tops Forecasts
  • Currency Markets Mired in Quiet Consolidation in Asian Trading Hours

Germany’s ZEW Survey of investor confidence headlines the economic calendar in European trading hours. The forward-looking Expectations gauge is forecast to decline for a fifth consecutive month in May, yielding the lowest reading since July 2013. If the polling period for the survey included last week and thereby captured the dovish tone of the ECB monetary policy announcement, an upside surprise is not out the question. Such a print would reflect analysts’ hopes that an expansion of stimulus will bode well for growth in the coming months. A pickup driven by such considerations can hardly be expected to boost the Euro however.

Later in the day, the spotlight turns to April’s US Retail Sales report. Expectations point to a 0.4 percent increase, marking the smallest gain in three months. US economic outcomes have increasingly improved relative to expectations since early April, opening the door for an upside surprise. As we discussed in our weekly outlook, such an outcome may help scatter doubts about the continuity of the Fed’s effort to “taper” QE asset purchases. Needless to say, such a result bodes well for the US Dollar against most of its leading counterparts. One possible exception could be the USDJPY: a pickup in speculation about US stimulus withdrawal may weigh on risk appetite, driving liquidation of Yen-funded carry trades and pushing the Japanese unit broadly higher. We have entered short GBPJPY.

Currency markets were little-changed overnight, with the G10 majors treading water against the greenback as a lull in headline event risk opened the door for digestion of last week’s surge of activity. The CVIX index of FX market volatility eased back after posting the largest one-day increase in four months after the ECB rate decision.

Asia Session

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European Session
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Critical Levels
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