Forex: US Dollar Looks for Strength in Upbeat Consumer Confidence Data

2014-05-16 04:51:00

Ilya Spivak, Sr. Currency Strategist

Talking Points:

Euro to Look Past Trade Balance Data, May Launch Corrective Rebound
UofM Data to Show US Consumer Confidence Hit 10-Month High in May
Risk Aversion May See USDJPY Diverge from Broader US Dollar Strength

The economic calendar is quiet in European trading hours. Eurozone Trade Balance figures amount to the only bit of semi-notable event risk, with the surplus expected to swell to €16.0 billion in march compared with €13.6 billion in the prior month. While a print in line with consensus forecasts would amount to the best print in four months, its implications for the Euro are likely to be limited at best in as much as the improvement will do little to discourage building ECB stimulus speculation. The single currency may have room for a corrective bounce amid a lull in negative news-flow however as markets digest the selloff following last week’s monetary policy announcement.

Later in the day, the spotlight turns to May’s preliminary estimate of the University of Michigan gauge of US consumer confidence. Economists are penciling in a print at 84.5, which would amount to the strongest outcome in ten months. Furthermore, US economic news-flow has increasingly improved relative to expectations in early April, suggesting analysts are underestimating the resilience of recovery in the world’s largest economy and opening the door for an upside surprise.

Needless to say, such a result bodes well for the US Dollar against most of its leading counterparts. One possible exception could be USDJPY.Improving US data may dissipate lingering doubts about the continuity of the Fed’s effort to “taper” QE asset purchases, reinforcing the likelihood that the program will be would down this year and fueling speculation about subsequent interest rate hikes.That may hurt risk appetite, driving liquidation of Yen-funded carry trades and pushing the Japanese unit broadly higher. We continue to hold short GBPJPY.

New to FX? START HERE!

Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
1:45	CNY	MNI Business Indicator (MAY)	53.7	-	51.1
2:16	CNY	Foreign Direct Investment (YoY) (APR)	3.4%	1.0%	-1.5%
4:30	JPY	Industrial Production (YoY) (MAR F)	7.4%	-	7.0%
4:30	JPY	Industrial Production (MoM) (MAR F)	0.7%	-	0.3%
4:30	JPY	Capacity Utilization (MoM) (MAR)	0.4%	-	-2.6%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	EUR	EU 25 New Car Registrations (APR)	-	10.6%	Low
6:45	EUR	French Non-Farm Payrolls (QoQ) (1Q P)	-0.1%	0.1%	Low
6:45	EUR	French Wages (QoQ) (1Q P)	-	0.2%	Low
9:00	EUR	Eurozone Trade Balance (€) (MAR)	16.0B	13.6B	Low
9:00	EUR	Eurozone Trade Balance s.a. (€) (MAR)	-	15.0B	Low