Market Drivers May for 14, 2015
- Euro squeezes higher as 1.1400 falls on post Retail Sales dollar weakness
- New Zealand Core Retail Sales 2.7% vs. 1.6%
- Nikkei -0.98% Europe -0.15%
- Oil $60/bbl
- Gold $1215/oz.
Europe and Asia
NZD: Retail Sales 2.7% vs. 1.6%
North America
USD: PPI 08:30
USD: Weekly Jobless 08:30
It's been a topsy turvy session for the euro today despite the fact that much of the continent is closed for a bank holiday. The euro short squeeze continued in early European dealing as the shock of the weak US Retail Sales number reverberated through the markets.
Yesterday's disappointing print on US Retails Sales data put a huge dent into the dollar bullish thesis. Up to now investors were certain that the combination of the drop in oil prices and steady job growth would translate into a healthy pick-up in consumer spending. With consumer spending making up almost 75% of the US economy, the pick up in demand is crucial to overall growth.
However, yesterday's data shows that the consumer is either unwilling or unable to spend at the moment and that is likely to put any plans to normalize monetary policy on hold. The Fed will not move on the interest rate front until US monetary authorities see steady growth in consumer spending. Job growth is simply not enough to make the Fed move off the zero bound level unless it is accompanied by the concomitant pickup in consumer demand.
That's why yesterday's surprisingly weak US Retail Sales number has had such an outsized impact on the dollar today. The EUR/USD climbed to a high of 1.1435 - a level it has not seen since February of this year; It may make a play for the critical 1.1500 figure as the day progresses.
The North American calendar is relatively light today with only the PPI and US weekly jobless claims on the docket, but the volatility in FX may continue, especially because Mario Draghi is expected to make a speech later today at an IMF forum and may touch on the issue of QE. One of the great ironies in the market is that since the ECB has started its bond buying program, yields have actually risen and the EUR/USD has strengthened. It will be interesting to see if Mr. Draghi expresses his concerns about that which may take some of the momentum out of the euro move.