[B]Talking Points
• Japanese Yen: Climbs Above 103.0
• Euro: Industrial New Orders Falter
• Pound: Retail Sales Better Than Expected
• US Dollar: Jobless Claims On Tap[/B]
The Pound was whipsawed after U.K. retail sales printed better than expected after heavy selling leading up to the release. April retail sales fell 0.2% equaling the revised drop from the month prior, but better than the 0.4% decline predicted by economists. Annualized sales fell to 4.2% as expected from an upwardly revised 4.7% in March. Food retailers led the fall as sales declined 1% in April following a 0.9% drop the month prior. Clothing sales were flat as Britons continue to show that their appetite for shopping has some life. Consumers have seen their purchasing power diminished by rising inflation due to record energy and food costs. The better than expected results will give policy makers some relief, as they have signaled that inflationary pressures will prevent then from cutting rates in the near-term. The 8-1 vote at their last policy meeting signals that the benchmark rate may remain at 5.00% for the foreseeable future.
After climbing above 1.5800 during the Asian trading session, EURUSD ran into significant resistance. The pair was weighed further when Euro-Zone industrial new orders fell 1.0% in March. It was the first decline in three months and greater than the -0.5% that economists were expecting. German orders fell 0.8% for the fourth consecutive month, as the regions largest economy shows signs of weakening. A strong Euro and rising oil prices is weighing on Europe’s manufacturing sector. The ECB expects growth to flatten in the second quarter after a 0.7% advance in the first quarter. Nevertheless, their staunch hawkish stance has eliminated any chance of a future rate cut and fueled speculation that a hike may be in store. As long as the markets believe this the Euro will continue to find support.
The release of the FOMC minutes from the last policy meeting confirmed that the Fed will pause from their current easing policy as inflation concerns mount. However, their growth outlook for the economy has declined as the housing sector continues to deteriorate. Until home prices stabilize and buyers return to the market the prospect of future rate cuts will remain. A significant jump in upcoming jobless claims will reinforced the central banks dour outlook and may weigh the dollar further. However, most eyes today will be on oil prices and if they will continue marching toward recent targets of $150.
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