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FOREX: US Dollar Aims Higher as Global Slowdown Fears Return

FOREX: US Dollar Aims Higher as Global Slowdown Fears Return

2011-08-18 04:38:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • All Eyes on US CPI, Philly Fed Data as Global Slowdown Fears Return
  • UK Retail Sales Unlikely to Prompt Lasting Response from British Pound
  • S&P 500 Futures Point Lower, Arguing for Renewed US Dollar Gains

UK Retail Sales figures headline the economic calendar in early European hours, with expectations calling for receipts to add 0.3 percent in the year to July, down from 0.4 percent in the previous month. On balance, the narrowly lower outcome is unlikely to stir much of a reaction from the markets given its limited impact for the monetary policy outlook. Indeed, after yesterday’s dour Bank of England minutes release, it would take a substantial disappointment to push traders’ rates forecast even deeper into dovish territory, while an unexpected uptick would likely pass by with little notice.

Volatility is likely to pick up in the afternoon however as US Consumer Price Index figures and the Philadelphia Fed Business Confidence gauge cross the wires. The former report is expected to show that headline inflation expected to drop for the first time in seven months, but moderation here is to be expected as oil prices pull back along with the diminishing outlook for global demand at large. As such, the Core CPI figure (which excludes volatile items like energy) ought to prove more interesting. This metric is forecast to rise to the highest since November 2009, reinforcing the status quo in the outlook for Federal Reserve monetary policy and keeping a lid on QE3 hopes (particularly after recent hawkish comments from a number of Fed officials). The latter release is tipped to show business confidence slumped again in August after a shallow bounce in the previous month. Remarks from New York Fed President Bill Dudley are also due to come across the wires.

S&P 500 stock index futures– a proxy for risk appetite at large – are pointing lower in late Asian hours, with the mix of weakening US data and fading near-term stimulus prospects reviving fears about the continuity of the global recovery. A report from Standard and Poor’s released yesterday that slashed the US economic outlook through 2013, calling for a more “drawn-out recovery” and arguing the current threat to financial markets is greater than in 2008 in the wake of the Lehman Brothers collapse, has certainly not helped either. On balance, the path of least resistance points to renewed risk aversion, which bodes well for the safe-haven US Dollar, Japanese Yen and Swiss Franc while threatening sentiment-sensitive currencies.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Merch. Trade Balance Total (¥) (JUL)

72.5B

69.3B

68.6B (R-)

23:50

JPY

Adj. Merch. Trade Balance (¥) (JUL)

-130.5B

-131.9B

-196.5B (R-)

23:50

JPY

Merchandise Trade Exports (YoY) (JUL)

-3.3%

-2.6

-1.6

23:50

JPY

Merchandise Trade Imports (YoY) (JUL)

9.9%

11.0%

9.8%

1:30

AUD

Average Weekly Wages (QoQ) (MAY)

1.2%

1.0%

1.1% (R+)

1:30

AUD

Average Weekly Wages (YoY) (MAY)

4.4%

4.0%

3.8%

1:30

AUD

RBA FX Transaction (A$) (JUL)

605M

-

1280M

5:00

JPY

Coincident Index (JUN F)

108.8

-

108.6

5:00

JPY

Leading Index (JUN F)

103.2

-

103.2

5:30

JPY

Nationwide Dept. Store Sales (YoY) (JUL)

-0.1%

-

0.3%

5:30

JPY

Tokyo Department Store Sales (YoY) (JUL)

-1.3%

-

0.4%

Euro Session: What to Expect

GMT

CCY

EXP

PREV

IMPACT

8:30

GBP

Retail Sales ex Auto Fuel (MoM) (JUL)

0.4%

0.8%

Low

8:30

GBP

Retail Sales ex Auto Fuel (YoY) (JUL)

0.1%

0.2%

Low

8:30

GBP

Retail Sales w/Auto Fuel (MoM) (JUL)

0.3%

0.7%

Medium

8:30

GBP

Retail Sales w/Auto Fuel (YoY) (JUL)

0.3%

0.4%

Medium

9:00

EUR

Euro-Zone Construction Output (YoY) (JUN)

-

-1.9%

Low

9:00

EUR

Euro-Zone Construction Output (MoM) (JUN)

-

-1.1%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4230

1.4521

GBPUSD

1.6398

1.6641

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