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Forex: US Dollar Seeks Help from Retail Sales Data, Fischer Rhetoric

By , Currency Strategist
13 March 2014 06:07 GMT

Talking Points:

  • Australian Dollar Soars as Jobs Report Shows Biggest Gain in 2 Years
  • Kiwi Dollar Higher as RBNZ Signals Start of Interest Rate Hike Cycle
  • US Dollar May Rise on Retail Sales Data, Pro-Taper Fischer Rhetoric

The Australian Dollar outperformed in overnight trade after the Employment report showed the economy added 47,300 jobs in February, marking the largest increase in nearly two years. An 80,500 surge in full-time hiring – the largest monthly increase since August 1991 – was particularly noteworthy.

We noted in our weekly forecast that the data would likely print on the firm side after leading indicators showed a pickup in service-sector jobs growth. The Aussie’s advance tracked a jump in Australia’s benchmark 10-year bond yield, suggesting the markets interpreted the result as increasing the probably that the RBA’s next move after the current “period of stability” will be an interest rate hike.

The New Zealand Dollar likewise advanced as the Reserve Bank of New Zealand (RBNZ) signaled today’s widely-expected 25 basis point interest rate increase likely marked the beginning of a tightening cycle. Central bank Governor Graeme Wheeler said he expects up to 125 basis points in tightening this year, although he cautioned that the pace of stimulus removal will be data-dependent.

The US Dollar and the Japanese Yen declined as risk appetite recovered, eroding demand for the go-to safe haven currencies. The MSCI Asia Pacific regional benchmark stock index rose 0.6 percent after the index slumped to a three-week low yesterday.

Looking ahead, a nearly empty economic calendar in European trading hours will see investors looking ahead to US news-flow. February’s Retail Sales report is expected to show receipts grew 0.2 percent, marking the best print in three months.

On the “fed-speak” docket, the spotlight will be on Senate confirmation hearings for Stanley Fischer, Lael Brainard and Jerome Powell. The former is nominated for Fed Vice Chair while the latter two are to be Governors.

Comments from Mr Fischer – until recently the Governor of the Bank of Israel and formerly a high-ranking official at both the IMF and the World Bank – will be in focus. While his prepared speech released yesterday falls in line with the Fed status quo, he has vocally supported policy normalization in prior interviews over recent months.

Taken together, an upbeat set of retail sales figures and a pro-“taper” tone in Fischer’s confirmation Q&A session on the heels of last week’s upbeat US payrolls data has scope to dampen speculation about a possible deceleration of the QE cutback cycle. Needless to say, that bodes well for the greenback.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

20:00

NZD

RBNZ Interest Rate Decision

2.75%

2.75%

2.50%

21:45

NZD

Food Prices (MoM) (FEB)

-1.0%

-

1.20%

23:50

JPY

Machine Orders (MoM) (JAN)

13.4%

7.1%

-15.7%

23:50

JPY

Machine Orders (YoY) (JAN)

23.6%

18.9%

6.7%

0:00

AUD

Consumer Inflation Expectation (MAR)

2.1%

-

2.3%

0:01

GBP

RICS House Price Balance (FEB)

45%

52%

52%

0:30

AUD

Employment Change (FEB)

47.3K

15.0K

18.0K

0:30

AUD

Unemployment Rate (FEB)

6.0%

6.0%

6.0%

0:30

AUD

Full Time Employment Change (FEB)

80.5K

-

2.7K

0:30

AUD

Part Time Employment Change (FEB)

-33.3K

-

15.3K

0:30

AUD

Participation Rate (FEB)

64.8%

64.5%

64.6%

5:30

CNY

Fixed Assets ex Rural YTD (YoY) (FEB)

17.9%

19.4%

19.6%

5:30

CNY

Retail Sales YTD (YoY) (FEB)

11.8%

13.5%

13.1%

5:30

CNY

Industrial Production YTD (YoY) (FEB)

8.6%

9.5%

9.7%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

9:00

EUR

ECB Publishes Monthly Report

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3747

1.3817

1.3860

1.3887

1.3930

1.3957

1.4027

GBP/USD

1.6474

1.6541

1.6580

1.6608

1.6647

1.6675

1.6742

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

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13 March 2014 06:07 GMT