RETAIL SALES DISAPPOINT BUT DOLLAR FINDS SUPPORT IN THE PPI
Donald Trump is planning an assortment of tariffs targeted at China. According to a report by Reuters, he will announce tariffs worth more than $60 billion. The new tariffs will target Chinese goods like apparel, telecom, and technology. This comes a week after he signed new aluminum and steel tariffs. This is likely to result into a trade war with China and other countries.
The Census Bureau released Retail Sales data that missed the consensus forecast. TCore retail sales, which excludes automobiles and gas, rose by 0.2%. This was higher than the number released last month but lower than the 0.3% expected by analysts. On the other hand, overall retail sales declined by 0.1%. This was the third straight month of retail sales declines. Analysts were expecting a 0.3% gain. At the same time, data from the Bureau of Labor Statistics showed that Mont-on-Month PPI rose by 0.2%. This was higher than the forecasted data of 0.1%.
In the United Kingdom, Prime Minister Theresa May expelled 23 Russian diplomats. This followed the widely-reported poisoning of a Russian ex-spy and his daughter ten days ago. They were attacked by a military-grade nerve agent in the Southern town of Salisbury. In addition, she said that the country would terminate all communications with the Russian government. The pound was little changed against the major currencies.
The Japanese Yen dropped to a two-week low against the dollar following the release of the minutes from the Bank of Japan. The minutes showed that most officials were confident about a smooth exit from the extensive monetary easing policy. However, they remained cautious about issuing specifics about the exit strategy saying that this will be determined by inflation. Kuroda stated that officials would use various tools to shrink the balance sheet without causing shocks to the markets.
The dollar gained slightly following today’s mixed data. While USD longs were disappointed with the retail data, they found solace in the closely-followed PPI data. The pair is now trading at 1.2355 and is forming lower lows, and lower highs. The pair is likely to follow the path of least resistance as it tries to erase the gains made yesterday. If this happens, the pair could try to test the 1.2340 level.
The pair is little moved today, following yesterday’s rally after the chancellor released his Spring Budget. The news about Russia has not affected the pair. The pair is now in consolidation mode, which means that it could break out in either direction. If it breaks to the downside, it could find support at the 1.3916 level.
The pair erased all gains made yesterday when traders were waiting for the minutes from the Bank of Japan. The pair has fallen from a high of 107.28 to a low of 106.30. The pair’s RSI is currently at 52.3 while the short and longer-term MAs are near the current price. As such, the current consolidation between 106.73 and 106.3 could continue before a breakout happens.