US Advance Retail Sales are expected to jump 0.5 percent in May after slipping 0.2 percent during the month prior, and excluding autos, the figure should be even stronger at a robust 0.7 percent pace. Since this index is not adjusted for inflation, rocketing food and oil prices are likely to be the primary driver for the increase. Indeed, over the course of May, the average price of a gallon of gasoline steady rose above $3.50 a gallon toward $4. In fact, according to the SpendingPulse survey, retail sales excluding autos improved in May as the rise in gasoline spending offset the drop in purchases of other discretionary items.
[B]What Are The Markets Facing? [/B]
<strong style="">
[B]Bonds – 10-Year Treasury Note Futures[/B]
US Treasuries continue to consolidate above the 50% fib of 104.55 – 121.81 at 133.06, as the contract remains weighed down by jawboning by US government and Federal Reserve officials. Indeed, the US dollar bullish commentary that has filled the news wires has done the trick, despite the fact that US data continues to point toward a weak economy. Looking ahead to Thursday’s retail sales report, spending is forecasted to rebound, which would support the case for additional Treasury losses. On the other hand, if the figures are surprisingly weak, the contract could jump higher.
[B]FX - EUR/USD[/B]
EUR/USD continues to consolidate within a wide range, as the recent surge in the US dollar has led the pair to pull back sharply thanks to heavy verbal intervention by Federal Reserve and government officials. However, EUR/USD jumped on Wednesday as a plunge in equities and the USD/JPY led the US dollar to slump. On Thursday, US retail sales are anticipated to rebound, and while it will likely be due primarily to a surge in gasoline prices, the news could weigh EUR/USD back down toward 1.5450. On the other hand, if the spending figures are remotely disappointing, EUR/USD could surge toward at least 1.5600 as bearish sentiment returns and traders focus on indications that the US has not escaped a recession quite yet.
Where will the US dollar go next? Discuss the topic with other traders in the EUR/USD Forum.
[B]Equities – Dow Jones Industrial Average [/B]
Trading in the US stock markets continues to look jittery, as the Dow Jones Industrial Average plunged once again on Wednesday as risk aversion returns to the markets. Indeed, traders should keep an eye on financial market news, as indications of distress amongst financial institutions could trigger widespread sell-offs in the global equity markets (and for that matter, forex carry trades). Looking ahead to Thursday, a surprisingly strong US retail sales report could prevent the DJIA from falling lower in the near-term. However, if the news is disappointing, the index could tumble toward the psychologically important 12,000 level.
