Winner winner, chicken dinner! The dollar hit a few blackjacks last Friday, as it blew past the euro and the pound. EUR/USD dropped 112 pips to finish at 1.3076, while GBP/USD closed at 1.5845, down 117 pips from its opening price.
Concerns about Spanish bond auctions continued to weigh on the markets and triggered some risk aversion to end the week.
Take note that the 7% level has often been regarded as the line-in-the-sand level for bond yields before a country rings up the EU for a bailout. If we continue to see Spanish bond yields breech the 6% level and move closer to 7%, it could give the dollar even more support on risk aversion flows.
In other news, headline and core CPI came in at 0.3% and 0.2% respectively. The headline result was just slightly above the expected 0.2% figure, while the core version was right in line with forecasts. This indicates that inflation remains subdued, which could give the Fed more room for additional quantitative easing measures down the road.
The preliminary University of Michigan consumer sentiment index was slightly disappointing, as it printed a figure of 75.7. Now only was this below the consensus of 76.4, but it also marked a downtick from the previous month’s reading of 76.4.
Digging a little deeper, the index indicates that my homies from the U.S. are feeling the squeeze and aren’t spending as freely as they want. Take note that this comes after March’s mixed NFP results, so we could see optimism tone down even more in coming months.
For today, we’ve got a slew of data coming in during the New York session, so make sure y’all on you’re A-games!
First up, we’ve got retail sales data at 12:30 pm GMT. Word on the street is that core and headline retail sales grew by 0.6% and 0.4% respectively, down from the 0.9% and 1.1% growth we saw in February. Check out Forexgump’s latest post for a more in-depth look at how to trade the retail sales report.
The Empire State manufacturing index will also be available at 12:30 pm GMT. After rising the past 4 months, expectations are that the index will trickle back down to 18.1, indicating less optimism for New York based manufacturers.
Lastly, at 1:00 pm GMT, the TIC Long-Term Purchases report will be released. This report measures the difference in the values of long-term foreign denominated securities bought by American and long-term U.S dollar denominated securities purchased by foreigners.
In short, it reflects the demand for U.S. financial assets. Take note that in order for foreigners to purchase U.S. assets, they must first get their hands on some scrillas (aka Greenbacks). So in effect, the report also reflects demand for the U.S. dollar.
In any case, the report is projected to show a net value of 40.7 billion USD. I’d take this with a grain of salt though, because the actual figure has been drastically different from the predicted figure. Just be aware of the time of the release, as it could lead to a spike in volatility in the markets.