The US dollar is the big winner this Thursday, finding support in rate hike expectations amid stronger retail sales and jobs data. It was a fairly quiet overnight session, as Greek optimism petered out and edged EURUSD lower, giving back most of this week’s strange post-NFP gains. After their best day in over a month, European equities experienced another strong showing after it appeared that Germany had blinked first in its stand-off with the delinquent Greeks. Athens’ stocks surged 6% today after German Chancellor Angela Merkel said Athens had committed to resolve the impasse with creditors in the coming days. EU Commission President Juncker made similar comments as both sides acknowledged it was time for one vital push. Policies changes in New Zealand paced Asian markets as economic data in Europe was mostly limited.
Overnight, the big mover was the New Zealand dollar after the central bank slashed rates by 25 bps to 3.25%. RBNZ Governor Wheeler stated further easing may be appropriate given low inflation, as a result the kiwi dollar lost over 200 pips pacing foreign exchange markets. Meanwhile the Australian dollar gained on the back of surprisingly strong employment numbers. Australia added 42,000 new jobs in the month of May as unemployment fell to 6.0% pushing the AUD/NZD rate to a 7-month high. Elsewhere in Asia, the dollar was supported, making gains against the Korean won as today it appears the market seems poised for a 2015 interest rate hike in the US. The Bank of Korea cut rates 1.50% in an attempt to stave off economic fallout from the growing fear concerning the MERS virus while the USDJPY rate jumped about 100 points ahead of this morning’s weekly jobless claims and retail sales figures.
Speaking of US economic data, weekly jobless claims and retail sales were both stronger than expected, further boosting the dollar. Retail sales in May jumped 1.2% over the previous month while only 279,000 Americans filed first time unemployment claims. After what has been a troubling week for the dollar, the greenback is finding some fundamental and technical support today. The Canadian dollar is in retreat this morning after recovering off a 200-point low last week. Oil and other commodity prices have plateaued for the moment leaving the so-called commodity currencies in a state of flux one day before the weekend. Bank of Canada Governor Stephen Poloz will be speaking this morning at 11:15am EST and markets will be keying on any indication for further rate hikes as Canada battles depressed prices from falling commodities.
Tomorrow, mostly second tier economic data concludes the trading week as EU industrial production and US producer prices will be unveiled. University of Michigan Consumer Sentiment should also garner attention after today’s retail sales boost.
Further reading:
US retail sales: +1.2%, core +1%, good revisions – USD jumps temporarily
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