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Dollar May Rise as US Retail Sales Drop Triggers Risk Aversion

Dollar May Rise as US Retail Sales Drop Triggers Risk Aversion

Ilya Spivak, Head Strategist, APAC

Talking Points

  • US Retail Sales Drop May Trigger Pre-Greek Election Risk Aversion
  • Euro at Risk as Industrial Output Shrinks, Stoking ECB Rate Cut Bets

The US Dollar was little changed against its top counterparts in overnight trade, with the major currency pairs in consolidation mode as markets digest recent volatility. The increasingly proximity of the weekend’s Greek election – where the country’s membership in the Eurozone appears to hang in the balance – seems likely to boost the greenback as investors turn defensive and risk aversion stokes haven demand.

Today’s US Retail Sales report may serve as the trigger. Expectationscall fora 0.2 percent decline, marking the first contraction in a year. The critical unknown in the global economic growth outlook is the degree to which a still choppy North American recovery can offset headwinds from weakness in Europe and Asia. Taken against a backdrop of fading QE3 bets after last week’s Ben Bernanke testimony disappointed stimulus hopes, this means a soft print stands to weigh on sentiment.

Eurozone Industrial Production figures are in focus on the European docket, with forecasts pointing to the largest drop in seven months in April. Evidence of increasingly anemic regional growth may begin to fuel ECB rate cut expectations,applying downward pressure to front-end yields and weighing on the Euro.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Machine Orders (MoM) (APR)

5.7%

1.6%

-2.8%

23:50

JPY

Machine Orders (YoY) (APR)

6.6%

4.9%

-1.1%

0:30

AUD

Westpac Consumer Confidence (JUN)

0.3%

-

0.8%

0:30

AUD

Westpac Consumer Confidence Index (JUN)

95.6

-

95.3

3:30

NZD

Retail Sales Ex inflation (QoQ) (1Q F)

-0.6%

-

1.6% (R+)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:30

EUR

French CPI (MoM) (MAY)

0.0%

0.1%

Low

5:30

EUR

French CPI (YoY) (MAY)

2.0%

2.1%

Low

5:30

EUR

French CPI - EU Harmonised (MoM) (MAY)

-0.1%

0.2%

Low

5:30

EUR

French CPI - EU Harmonised (YoY) (MAY)

2.3%

2.4%

Low

5:30

EUR

French CPI Ex Tobacco (MAY)

124.8

124.8

Low

6:00

EUR

German CPI (MoM) (MAY F)

-0.2%

-0.2%

Medium

6:00

EUR

German CPI (YoY) (MAY F)

1.9%

1.9%

Medium

6:00

EUR

German CPI - EU Harmonised (MoM) (MAY F)

-0.3%

-0.3%

Medium

6:00

EUR

German CPI - EU Harmonised (YoY) (MAY F)

2.1%

2.1%

Medium

6:45

EUR

French Current Account (euros) (APR)

-4.2B

-4.4B

Low

7:15

CHF

Producer & Import Prices (MoM) (MAY)

-0.1%

-0.1%

Low

7:15

CHF

Producer & Import Prices (YoY) (MAY)

-2.0%

-2.3%

Low

8:00

EUR

Italian CPI - EU Harmonised (MoM) (MAY F)

0.0%

0.0%

Low

8:00

EUR

Italian CPI - EU Harmonised (YoY) (MAY F)

3.5%

3.5%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (MAY F)

0.0%

0.0%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (MAY F)

3.2%

3.2%

Low

9:00

EUR

Euro-Zone Industrial Production (MoM) (APR)

-1.2%

-0.3%

Medium

9:00

EUR

Euro-Zone Industrial Production (YoY) (APR)

-2.7%

-2.2%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2455

1.2578

GBPUSD

1.5486

1.5623

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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