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US Dollar Looks to Industrial Production, UofM Data to Drive Fed Bets

US Dollar Looks to Industrial Production, UofM Data to Drive Fed Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar Looks to Industrial Production, UofM Data to Inform Fed Outlook
  • Aussie, NZ Dollars Drop Amid Deteriorating Policy Expectations Overnight
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The US Dollar corrected higher in overnight trade after sliding to a four-month low in the preceding session. The Australian and New Zealand Dollars underperformed in moves that appeared linked to deteriorating monetary policy expectations.

Narrowing bond yield spreads pointed to the two currencies’ deteriorating return advantage relative to the greenback in the minds of investors. Meanwhile, OIS-based measures of the priced in 12-month RBA and RBNZ policy outlooks shifted downward. In the case of New Zealand, traders’ expectations are now the most dovish in over six years, leaning toward two interest cuts between now and this time next year.

Looking ahead, a quiet economic calendar in European trading hours is likely to see markets looking ahead to US news-flow in the final hours of the trading week. April’s Industrial Production report and May’s preliminary University of Michigan Consumer Confidence gauge are on tap.

US economic data has been stabilizing relative to consensus forecasts since late March following a period of steep weakening set off in January. If this year’s downturn proves to be as similar to last year’s first-quarter slump as it seems to be, expectations that the Federal Reserve may yet stick with its original timeline and raise rates mid-year could re-emerge.

With that in mind, traders will monitor data outcomes closely for signs of recovery in the second quarter. Such evidence stands to boost the US unit. Alternatively, soft results reinforcing the recent dovish shift in FOMC policy expectations may encourage continued unwinding of long-USD exposure.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Loans & Discounts Corp (YoY) (MAR)

3.01%

-

3.22%

23:50

JPY

PPI (YoY) (APR)

-2.1%

-2.1%

0.7%

23:50

JPY

PPI (MoM) (APR)

0.1%

0.1%

0.3%

2:00

CNY

FDI (CNY) (YoY) (APR)

10.5%

2.0%

2.2%

3:40

JPY

BOJ’s Kuroda Speaks in Tokyo

-

-

-

5:00

JPY

Consumer Confidence Index (APR)

41.5

41.8

41.7

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:15

CHF

Producer & Import Prices (MoM) (APR)

-0.1%

0.2%

Low

7:15

CHF

Producer & Import Prices (YoY) (APR)

-3.4%

-3.4%

Low

8:30

GBP

Construction Output SA (MoM) (MAR)

4.0%

-0.9%

Low

8:30

GBP

Construction Output SA (YoY) (MAR)

1.1%

-1.3%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.1191

1.1295

1.1352

1.1399

1.1456

1.1503

1.1607

GBPUSD

1.5601

1.5687

1.5732

1.5773

1.5818

1.5859

1.5945

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

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