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Euro extends losses as eurozone CPI slows to 1.8%The euro continues to lose ground and is trading at 1.1080 in the North American session, down 0.49% on the day. The euro is down for a third consecutive day and has declined 0.9% during that time. Eurozone inflation eased to 1.8% y/y in September, down from 2.2% in August and below the market estimate of 1.9%. This was the lowest rate since April 2021 and below the European Central Bank’s inflation target of 2%. The drop in inflation was largely driven by the sharp decrease in energy prices. Monthly, inflation declined by 0.1%, down from the 0.1% gain in August. Services inflation, which has been a headache for the ECB, dropped from 4.1% to 4.0%. The core rate, which is a better indicator of long-term inflation trends, fell to 2.7%, down from 2.8% in August and below the market estimate of 2.8%. Inflation declined across the bloc, with Germany, France, Italy and Spain all recording inflation rates below 2%. The ECB has approached the new rate-cutting cycle with caution, as high services inflation and wage growth are reminders that the battle against inflation isn’t over. The markets expect the ECB to remain on the sidelines at the October meeting and re-evaluate a possible rate cut in December. The Federal Reserve is expected to be aggressive in its rate-cutting cycle, which started last month with a large cut of 50 basis points. On Monday, Fed Chair Powell poured cold water on expectations for another jumbo rate cut, saying that the economy was in “solid shape” and that the Fed was not in any rush to cut rates quickly. Powell’s remarks have lowered market odds of a 50-bps cut to 40%, compared to 58% one week ago, according to CME’s FedWatch. EUR/USD pushed below support at 1.1096 and tested support at 1.1058 earlier. The next support level is 1.1001 1.1153 and 1.1191 are the next resistance lines
by OANDA
Japanese yen soars on Japan’s political dramaThe Japanese yen has steadied on Monday after posting huge gains on Friday. USD/JPY is trading at 142.43 in the European session, up 0.15%. The yen soared on Friday but it was in response to political rather than economic developments. The ruling Liberal Democratic Party (LDP) unexpectedly chose Shigeru Ishiba as its new leader and he will take over as Prime Minister on Tuesday. Ishiba’s win was a surprise as Economic Minister Sanae Takaichi was expected to win the LDP leadership race. The financial markets reacted sharply – the Japanese yen soared 2.1% on Friday while the Japanese stock market is sharply lower today. Takaichi is a strong supporter of lower interest rates while Ishiba favors the Bank of Japan’s moves towards normalization. Ishiba said today that he will call a snap election on October 27, which he is almost certain to win. Ishiba’s election would be a green light for the BoJ to continue tightening policy which would make the yen more attractive to investors. Overshadowed by the political drama was Monday’s Japanese data, which was a mix. Industrial production slid 3.3% m/m in August, after a 3.1% gain in July and well short of the market estimate of -0.9%. Yearly, industrial production declined 4.9%, compared to a 2.9% gain in July. There was better news from retail sales, which rose 0.8% m/m in August, up from 0.2% in July and a three-month high. Yearly, retail sales climbed 2.8%, up from a revised 2.7% in July and above the market consensus of 2.3%. Inflation remains under control and this was reiterated on Friday by the US Core PCE Price Index, the Fed’s preferred inflation indicator. The index rose 0.1% m/m in August, a three-month low. This was down from 0.2% in July and below the market estimate of 0.2%. Yearly, Core PCE ticked up to 2.7%, after three consecutive months at 2.6% and in line with expectations. USD/JPY tested resistance at 142.86 earlier. Above, there is resistance at 143.19 There is support at 142.26 and 141.93
by OANDA
USD/JPY rebounds after US retail sales beats estimateThe Japanese yen is down sharply on Tuesday. USD/JPY is up 0.73% today, trading at 141.64 in the North American session at the time of writing. On Monday, the yen pushed below 140 per dollar for the first time since July 2023. The yen has looked razor sharp, gaining 2.9% in the month of September alone. The yen has surged a massive 15% in the third quarter, the best-performing G-10 currency. The Federal Reserve is virtually certain to raise interest rates by at least 25 basis points on Wednesday. The Bank of Japan, which meets on Friday, is expected to keep rates on hold. The BoJ has been an outlier among the major central banks and is expected to continue tightening, which has boosted the yen. The BoJ has signaled that further rate hikes are coming and this could occur as soon as December. In the US, today’s retail sales release was the final key event ahead of the Federal Reserve meeting. Retail sales softened in August but the decline wasn’t as sharp as expected. Monthly, retail sales posted a small gain of 0.1% in August, down from a revised 1.1% in July but still better than the market estimate of -0.2%. On an annualized basis, retail sales eased to 2.1%, down from 2.9% in July and just below the forecast of 2.2%. The retail sales release is not expected to impact the Federal Reserve decision on Wednesday. The rate cut odds for a half-point cut stand at 67% according to the CME’s FedWatch tool, unchanged by the retail sales release. USD/JPY pushed above 141.17 earlier and is testing resistance at 141.72 There is support at 140.37 and 139.82
by OANDA
Canadian dollar jumps on retail sales reboundThe Canadian dollar is showing some strength on Friday. In the North American session, USD/CAD is trading at 1.3532 at the time of writing, down 0.60% on the day. The Canadian dollar is at its highest level since early April and is poised to post its third winning week in a row. Canada’s retail sales report was a mix. In June, retail sales fell 0.3% m/m, confirming the initial estimate and following a May reading of -0.8%. However, the initial estimate for July jumped 0.6%, which would indicate a much-needed rebound in consumer spending. Retail sales were down 0.5% in the second quarter and 0.4% in Q1, which would mark the weakest two quarters since 2009, outside the covid pandemic. The spike in July is likely due to the Bank of Canada’s quarter-point rate cuts in June and July, bringing down the benchmark rate to 4.5%. The BoC is expected to continue to trim rates as inflation has eased and the labor market shows signs of decline. The annual Jackson Hole meeting has begun and the highlight of the summit will be today’s speech from the host, Fed Chair Jerome Powell. The markets are all ears, although it would not be a surprise if Powell’s speech is little more than a cautious acknowledgment that inflation is moving in the right direction and that the Fed is poised to cut at the Sept. 18 meeting. The markets have fully priced in a rate cut at next month’s meeting, with the odds at 71% for a 25-basis point cut and 29% for a 50-bps cut, according to CME’s FedWatch. There’s a strong chance that the Fed will deliver additional cuts before the end of the year, but recent employment data has been very weak and that could delay further rate cuts. The next employment report on Sept. 6 will be a key factor in determining the Fed’s rate path. USD/CAD has pushed below support at 1.3578 and is testing support at 1.3538. Below, there is support at 1.3478 There is resistance at 1.3628 and 1.3653
by OANDA
NZ dollar slips ahead of retail sales, Powell’s speechThe New Zealand dollar is drifting on Thursday. In the North American session, NZD/USD has fallen to 0.6132 at the time of writing, down 0.41% on the day. The New Zealand dollar continues to have its way with its US counterpart and has soared 4% since July 29. The markets are braced for a downturn in retail sales for the second quarter, with a market estimate of -1%, following a 0.5% gain in the first quarter. The New Zealand economy has been struggling and weak retail sales in June drove the Services PSI lower to 40.2 in June, compared to 42.6 in May. A reading below 50 indicates contraction. High interest rates have weighed heavily on economic activity and consumers have cut back sharply on discretionary spending. In the US, the FOMC minutes of the July meeting reaffirmed that the Fed is headed towards a milestone rate cut at the Sept. 18 meeting. Most of the Fed officials at the meeting favored reducing rates next month, provided that that data “continued to come in about as expected”. The markets have fully priced in a September cut, which hasn’t happened since the onset of the Covid pandemic. The annual Jackson Hole symposium is often little more than a photo-op but this year promises to be different. Next month, the Federal Reserve is poised to deliver its first rate cut since March 2020, likely in the form of a quarter-point cut. There is an outside chance of a large half-point cut, which would become more likely if the next jobs report on Sept. 6 points to further cooling job growth. NZD/USD is testing support at 0.6147. Below, there is support at 0.6100 The next resistance line is 0.6209
by OANDA
GBP/USD extends gains as retail sales bounce backThe British pound has extended its gains on Friday. GBP/USD is trading at 1.2887 in the European session, up 0.31% on the day at the time of writing. It has been a winning week for the pound, which has climbed 1%. There was more good news from the UK economy as retail sales rebounded in July by 0.5% m/m, after a revised decline of 0.9% in June and in line with the market estimate. Annually, GDP surged 1.4%, compared to -0.8% in June and matching the market estimate. The pound has moved higher in response to the positive retail sales data. The bounce in retail sales reflects summer discounts and purchases related to the Euro 2024 and the Paris Olympics, such as apparel. As well, with inflation finally under control and running close to 2%, consumers are responding by opening up their wallets and purses. The positive retail sales report follows yesterday’s solid GDP release. The UK economy recorded rose 0.6% in Q2, a second straight quarter of growth. The economy is showing some strength in the second quarter but that may not have much effect on the Bank of England’s rate path. The increase in growth may not be sustainable and BoE policy makers have said that they are more focused on inflation, particularly service inflation, which remains much higher than the BoE’s 2% target. The markets are expecting further cutting before the end of the year and have priced in a rate reduction at the November meeting. GBP/USD is testing resistance at 1.2884. Above, there is resistance at 1.2914 1.2841 and 1.2811 are the next support levels
by OANDA
GBP/USD dips after strong US retail salesThe British pound posted losses earlier but has clawed back and is in positive territory. GBP/USD is trading at 1.2846 in the North American session, up 0.20% on the day. After sustaining a technical session in the second half of 2023, the UK economy is on a rebound. GDP climbed 0.6% in the second quarter, in line with expectations and a notch lower than the Q1 gain of 0.7%. On an annualized basis, GDP rose 0.9%, up from 0.3% and in line with the market estimate. The annualized gain was the strongest growth rate since Q3 of 2022. The strong GDP data comes on the heels of yesterday’s inflation release. CPI for July rose to 2.2%, above the June gain of 2% but below the market estimate of 2.3%. The strong GDP could mean a pause at the September rate meeting. The markets are expecting the next rate cut in November, after the Bank of England delivered the first cut of the new rate-cutting cycle earlier this month. The US economy may have lost a step but don’t count the US consumer out. Retail sales jumped 1% m/m in July, up sharply from a revised -0.2% and blowing past the market estimate of 0.3%. The strong consumer spending data supports a modest rate cut of 25 basis points. Last week’s rout in the global markets raised expectations of a massive 50-basis point cut as a response to fears of a deterioration in the US economy. These fears have been allayed somewhat but if the US posts further weak numbers we could see panic return to the markets. GBP/USD pushed above resistance at 1.2838 earlier and is testing resistance at 1.2857. Above there is resistance at 1.2889 1.2706 and 1.2787 are the next support levels
by OANDA
GBP/USD edges lower after soft retail sales reportThe British pound has slightly lower on Friday. GBP/USD is trading at 1.2922 in the North American session, down 0.17% on the day. The pound has sparkled in the month of July but has hit a snag, dropping 0.50% on Thursday and extending those losses today. UK retail sales suffered a turnaround in June, falling 1.2% m/m after a strong gain of 2.9% in May and below the market estimate of -0.4%. Annually, retail sales fell 0.2%; following a revised 1.7% gain in May and shy of the market estimate of a 0.2% rise. Fingers were pointing again at inclement weather, which kept shoppers away from the stores. A wet April was blamed for a weak retail sales report and the unseasonably cool weather in June, along with uncertainty prior to the July 4th election were blamed for a decrease in June retail sales. Consumers are showing a reluctance to spend, despite inflation falling to 2% and an increase in wages. Consumers have been squeezed by inflationary pressures and high interest rates and confidence in the economy has been weak. Still, the GfK consumer confidence index, released on Friday, ticked up to -13 for July, up a notch from -13 in June and its highest level since September 2021. In the US, the Fed is signaling that the central bank is moving closer to a historic rate cut. Earlier in the week, FOMC members Chris Waller and John Williams hinted at a rate cut in the coming months, although neither provided a specific date. Waller said that the higher-than-expected inflation in the first quarter of 2024 may have been an “aberration” and inflation was moving lower towards the 2% target. The markets have priced in a September cut at 90%, up from just 70% several weeks ago. GBP/USD is testing support at 1.2915, followed by support at 1.2887 1.2969 and 1.2997  are the next resistance lines
by OANDA
NZ dollar can’t find its footingThe New Zealand dollar has posted sharp losses for a second successive day. NZD/USD is trading at 0.6042 in the North American session, down 0.54% on the day at the time of writing. The New Zealand dollar has declined 1.3% this week and is trading at its lowest level since May 15. New Zealand releases the second quarter inflation report early Wednesday. The market estimate stands at 3.5% y/y, compared to 4% in the first quarter. Quarterly, inflation is expected to remain steady at 0.6%. The inflation report will be a key factor in the Reserve Bank of New Zealand’s rate decision on August 14. The central bank stunned the markets with a dovish stance at last week’s rate meeting. The RBNZ held the cash rate at 5.5% as expected but left the door open to rate cuts if inflation falls as expected. The dovish pivot means that the August meeting will be live. At the previous meeting in May, the RBNZ discussed a rate hike but made a dramatic shift at the July meeting, noting that it was concerned the economy could be cooling faster than it had expected. US retail sales dipped to 2.3% y/y in June, down from 2.6% in May but higher than the forecast of 2.1%. Monthly, retail sales were unchanged in June, down from a revised 0.3% in May and matching the market estimate. This was the second time in three months that retail sales were unchanged, pointing to weakness in consumer spending. NZD/USD pushed below support at 0.6071 earlier. Below, there is support at 0.6024 There is resistance at 0.6160 and 0.6202
by OANDA
AUD/USD shrugs as Australian retail sales jumpThe Australian dollar is drifting on Wednesday. AUD/USD is trading at 0.6674 at the time of writing, up 0.11%on the day. Australian consumers have been counting their pennies and reducing discretionary spending. Consumers are feeling the double squeeze of high borrowing costs and stubborn inflation, but retail sales pulled a surprise today with a gain of 0.6% m/m in May. This follows a meager gain of 0.1% in April and crushed the market estimate of 0.2%. This marked the sharpest gain since January, but does not mean that Australian consumers have suddenly switched to a spendthrift mindset. Rather, the jump in retail sales was the result of many retailers involving large discounts and sales events. The monthly May release was strong but there is an underlying weakness in consumer spending, as retail sales climbed just 1.7% y/y in May, compared to over 4% in early 2023. This means that the retail market remains weak despite today’s upbeat report. The Reserve Bank of Australia has stressed that rate hikes are on the table, as stubbornly high inflation has raised concerns that monetary policy may have to be tightened. The RBA discussed the possibility of a rate hike at each of the past two meetings and today’s strong retail sales could strengthen the case for a hike, although policy makers won’t make a rate decision based on one release. The RBA meets next on August 6 and the second-quarter CPI report, which will be released a week before will play a key role in the decision. The markets have priced in a 32% chance of a quarter-point at the August meeting, according to the ASX rate tracker. This would bring the cash rate to 4.6% and would mark the first rate hike since last November. There is resistance at 0.6699 and 0.6729 0.6660 is a weak support level. The next support level is 0.6630
by OANDA
GBP/USD shrugs despite sparkling retail salesThe British pound is slightly lower on Friday. GBP/USD is trading at 1.2636 early in the North American session, down 0.17% on the day. UK retail sales jumped 2.9% m/m in May, an impressive turnaround from the revised 1.8% decline in April and blowing past the market estimate of 1.8%. This was the highest level since January. Yearly, retail sales climbed 1.3%, rebounding from a revised 2.3% drop in April and above the market estimate of -0.9%. This marked the sharpest gain since March 2022. The increase in consumer spending was felt across the economy, as rising wages have helped consumers withstand weak economic growth and high interest rates. The weather was a key factor, as a very wet April dampened retail sales, which rebounded in what was the warmest May on record. UK GfK Consumer Confidence rose to -14 in June, up from -17 in May and above the market estimate of -17. Consumers remain pessimistic but the confidence indicator has climbed for three straight months and hit its highest level since November 2021. The Bank of England stayed on the sidelines on Thursday, keeping the benchmark rate of 5.25% unchanged for an eighth straight time. The BoE upgraded its growth forecast for the second quarter and that could mean an August rate cut, which would be the first cut since the BoE embarked on its steep rate-hike cycle to tame high inflation. Earlier in the week, inflation dropped to 2%, the BoE’s target, for the first time in almost three years. The fly in the ointment is that service inflation is running at 5.7% and will have to come down before the BoE cuts rates. GBP/USD is testing support at 1.2633. Below, there is support at 1.2608 There is resistance at 1.2679 and 1.2704
by OANDA
AUD/USD rises after retail sales tick higherThe Australian dollar has edged higher on Tuesday. AUD/USD is trading at 0.6667, up 0.25% on the day at the time of writing. Australia’s retail sales rise 0.1%, CPI next Australian consumers remain frugal and cautious, as retail sales rose just 0.1% m/m April. This was a rebound from the 0.4% decline in March and beat the market estimate of 0.2%. On a yearly basis, retail sales rose 1.3%, compared to 0.9% in March. Retail activity has been flat and that could prod the Reserve Bank of Australia to lower interest rates later this year. The RBA has held the cash rate at 4.35% for four straight times and the markets are anticipating that the next move will be a cut. However, the RBA has sounded hawkish and the RBA minutes of the May 7th meeting indicated that policy makers discussed a rate hike at the May 7th meeting. This was due to concerns that inflation, particularly services prices has been stickier than expected and that the path to the RBA’s 2-3% target will not be smooth. Australia releases April CPI early on Wednesday, which is expected to tick lower to 3.4% y/y, down from 3.5% in March. Fed members continue to send out a hawkish message about rate policy. Minneapolis Fed President Neel Kashkari said on Tuesday that he would want to see “many more months of positive inflation data” before the Fed lowers rates, adding that a rate hike should not be ruled out. Kashakri said earlier this month that rates need to stay in restrictive territory for “an extended period”. The markets are more dovish and have priced in a rate cut at 52%, according to the CME’s FedWatch. AUD/USD Technical 0.6643 is a weak support level. Below, there is support at 0.6578 0.6695 and 0.6760 are the next resistance lines
by OANDA
GBP/USD steady despite plunge in retail salesThe British pound continues to have a quiet week in which it has stayed close to the 1.27 line. GBP/USD is trading at 1.2715, up 0.13% at the time of writing in the European session. UK retail spending slumped in April with a 2.3% m/m decline. This followed a revised 0.2% decline in March and was much weaker than the market estimate of -0.4%. It was the largest decrease in four months, driven by a sharp fall gasoline and non-food items. Most sectors reported a drop in sales volume as unusually rainy weather put a damper consumer spending. On an annualized basis, retail sales fell 2.7%, after a revised 0.4% gain in March and missing the market estimate of -0.2%. Is the UK economy fading? The economy performed well in the first quarter, with Q1 GDP rising 0.6% q/q, its strongest quarter in over two years. The weak retail sales could be indicative of a weaker second quarter, which would support the BoE lowering the current cash rate of 5.25% which is throttling economic activity. With inflation falling to 2.3% in April, the 2% target is within striking distance and speculation has risen that the BoE will start to lower rates as early as August. In the US, the services and manufacturing sectors showed improvement in May. Services PMI jumped to 54.8 in May, up from 51.3 in April and above the market estimate of 51.3. This was the highest level in a year and pointed to improving business activity despite high interest rates. Manufacturing remains weak but the PMI rose from 50.0 to 50.9, which shows very modest growth. The 50 level separates contraction from expansion. GBP/USD is testing resistance at 1.2710. Above, there is resistance at 1.2736 1.2674 and 1.2648 are the next support levels
by OANDA
AUD/USD stabilizes after taking a tumble, Fed nextThe Australian dollar has steadied on Wednesday after sliding 1.4% a day earlier. AUD/USD is up 0.19%, trading at 0.6489 at the time of writing in the North American session. Australian dollar slides after soft retail sales Retail sales in Australia fell 0.4% m/m in March, following a downwardly revised 0.2% gain in February and shy of the market estimate of 0.2%. The decrease in sales was felt across all industries, as consumers held tight to the purse strings. On an annualized basis, retail sales grew by just 0.8% in March, the lowest level since August 2021. The Australian dollar responded with sharp losses to the disappointing retail sales release. China posted soft PMIs which also weighed on the Aussie. The manufacturing PMI eased to 50.4 in April, down from 50.8 and just above the market estimate of 50.3. The services PMI fell to 51.2, compared to 53.0 in March and below the market estimate of 52.2. The data indicates that manufacturing and services are showing little growth, another sign of the slowdown in China, which is Australia’s largest export market. Weaker economic activity in China means less demand for Australian exports, which is weighing on the Australian dollar. Will Powell make a hawkish pivot? The Federal Reserve meets later today, with little doubt that it will maintain interest rates for a sixth straight time. The target range for the benchmark rate of 5.25% to 5.5% hasn’t changed since July and the Fed has shown that it is willing to prolong its “higher for longer” stance as long as is needed. Fed Chair Powell is expected to have a hawkish message for the market, which would likely provide the US dollar with a boost. AUD/USD Technical AUD/USD is putting pressure on resistance at 0.6504. Above, there is resistance at 0.6537 0.6439 and 0.6406 are the next support levels
by OANDA
GBP/USD eyes retail salesThe British pound is having a quiet week and that trend has continued on Thursday . In the North American session, GBP/USD is trading at 1.2450, down 0.04%. The UK release retail sales for March on Friday. The market forecast for March is 0.7% y/y after a decline of 0.4% y/y in February. Today’s British Retail Consortium retail sales index jumped 3.5% y/y in March, raising hopes that the official retail sales release will also improve. The driver behind the strong gain was spending on food, as the Easter holidays fell in late March. Retail sales have shown sharp swings in 2024, with adverse weather keeping shoppers at home and weighing on consumer spending. The weather will improve in the coming months and the Paris Olympics and Taylor Swift concerts are expected to lead to an increase in consumer spending and demand. Inflation in the UK declined to 3.2% y/y in March, down from 3.4% in February but higher than the market estimate of 3.1%. The inflation rate fell to its lowest since September 2021 but the BoE remains cautious and is yet to signal that rate cuts are coming, especially as core inflation has proven to be sticky and is more than double the 2% target. In the US, the Federal Reserve is none too happy about inflation accelerating in February and March. Fed Chair Powell said this week that higher-than-expected inflation would delay rate cuts and there are doubts whether the Fed will raise rates at all this year. The markets have slashed expectations for rate cuts due to the robust US economy and rising inflation. GBP/USD tested support at 1.2451 earlier. Below, there is support at 1.2421 There is resistance at 1.2486 and 1.2516
by OANDA
S&P Bearish after Retail Sales.. Israel/Iran conflict abroad? 🤨The S&P futures is quite weak after strong USD retail sales data. This move opposes a rational reaction to data that came out better than forecasted by a good margin. The market is pulling back and continuing the bearish momentum from the previous week. This may have to do with the conflict between Israel and Iran, this retracement back down. Oil is pushing up and Gold is pushing up late in the NY session here on Monday April 15th.. Money is being shifted to those Risk-On assets rather than stock indices such as S&P
CME_MINI:ES1!Short
by ShrewdCatfx
Pound drops to 1-month low after flat retail salesThe British pound has extended its losses on Friday. In the European session, GBP/USD is trading at 1.2600, down 0.45%. Earlier, the pound fell as low as 1.2584, its lowest level since March 20. UK retail sales were flat in February, after a revised 3.6% gain (m/m) in January. This was better than the market estimate of -0.3%. On an annualized basis, retail sales fell by 0.4%, erasing most of the 0.5% gain in January. Britain’s weather was unusually wet in February which dampened retail trade. The Bank of England maintained the cash rate at 5.25% at Wednesday’s meeting. The pause was widely expected and marked the sixth straight time that the BoE has kept rates unchanged. Perhaps the most significant development at the meeting was the Monetary Policy Committee vote. The MPC voted 8-1 to keep rates unchanged, with one member voting for a quarter-point cut. This was the first time in the current tightening cycle that no members voted for a hike - at the previous meeting, two members voted to raise rates by a quarter-point. The markets pounced on the vote as evidence of a dovish shift in the Bank’s stance and the British pound sank 1% on Wednesday, its worst one-day performance since October 2023. It looks like rates have peaked, but when can we expect the BoE to start cutting rates? Governor Bailey said after the meeting that inflation is not “yet at the point where we can cut interest rates, but things are moving in the right direction”. The markets are looking at an initial cut in June, with an outside possibility in May. GBP/USD is testing support at 1.2605. Below, there is support at 1.2552 There is resistance at 1.2704 and 1.2757
by OANDA
Aussie calm ahead of RBA decisionThe Australian dollar is showing little movement on Monday. In the North American session, AUD/USD is trading at 0.6655, down 0.07%. The Reserve Bank of Australia wraps up a two-day meeting on Tuesday and is widely expected to maintain the cash rate at 4.35%. The RBA last raised rates in November 2023 and rates have likely peaked. There isn’t much suspense ahead of tomorrow’s meeting Economic growth has been hampered by elevated interest rates and the unemployment rate has been moving higher. This essentially precludes a rate hike. As for a cut in rates, the RBA is not in any rush, as inflation is falling but the current clip of 4.1%, it is more than double the 2% target. The RBA hasn’t signaled it is planning to cut rates and has maintained a rate hike bias, although barring a jump in inflation, it’s very unlikely that we’ll see another rate hike. The markets are looking at an initial rate cut sometime this year. Investors will be looking for hints at the meeting about future rate policy and the rate statement and Governor Bullock’s press conference could provide some insights. Any signals of a removal of its tightening bias could send the Australian dollar lower. China, Australia’s largest trading partner, started the week with mixed data. Industrial production sparked with a gain of 7% y/y in January-February combined, its highest level in two years. This followed a 6.8% gain in December and easily beat the market forecast of 5%. Retail sales eased to 5.5% y/y in January-February, down from 7.4% in December but above the market estimate of 5.2%. There is resistance at 0.6584 and 0.6615 0.6528 and 0.6497 are providing support
by OANDA
NZ dollar dips after hot US Producer Price IndexThe New Zealand dollar has lost ground on Thursday. In the North American session, NZD/USD is trading at 0.6136, down 0.33%. On Friday, New Zealand releases the Manufacturing PMI. It was a busy day in the US, and this writer expected that retail sales would be the highlight of the day. In the end, it was the Producer Price Index which stole the show and gave the US dollar a boost after a stronger-than-expected performance. PPI for February surprised with a gain of 0.6% m/m, up sharply from 0.3% in January and the market estimate of 0.3%. This was the highest rate since August 2023 and the primary drivers of the upswing were increases in the price of goods and energy. On an annualized basis, PPI jumped 1.6%, up from a revised 0.9% in January The Federal Reserve is unlikely to get worked up from the headline reading, as core PPI eased to 0.3% m/m, down from 0.5% in January but higher than the market estimate of 0.2%. On an annualized basis, core CPI remained steady at 2%, just above the market estimate of 1.9%. Retail sales rebounded in February with a gain of 0.6% m/m, following a revised 1.1% decline in January but shy of the market estimate of 0.8%. Retail sales rose 1.5% y/y, after a zero reading in January. New Zealand will wrap up the week with Manufacturing PMI. The manufacturing sector has struggled and has been mired in negative territory for eleven straight months. Still, there was some improvement in January, as the PMI rose from 43.1 to 47.3, its highest level since June 2023. The upswing is expected to continue in February, with a forecast of 48.1. NZD/USD is testing support at 0.6154. Below, there is support at 0.6092 There is resistance at 0.6240 and 0.6302
by OANDA
Aussie edges higher despite business confidence declineThe Australian dollar remains close to the 0.66 line, where it has been for most of the week. In the North American session, AUD/USD is trading at 0.6620, up 0.21%. The business sector is not feeling very confident about the near-term outlook of the Australian economy. The NAB Business Confidence index dipped to zero in February, down from one in January but above the forecast of -1. The NAB report noted that retail confidence remains deeply negative. There was better news from the NAB Business Conditions index, which rose to 10 in February, up from 7 in January. By industry, manufacturing showed improvement but retail and construction weakened. Australia’s economy has been limping along and consumers are still feeling the squeeze of the cost-of-living crisis and high mortgage payments as the Reserve Bank of Australia is yet to lower elevated interest rate levels. The RBA has raised rates only once since June 2023 and hasn’t ruled out rate hikes, although the markets have priced in rate cuts for later this year. The RBA is unlikely to consider lowering rates until inflation falls lower. In January, CPI rose 3.4% y/y, still well above the RBA’s target band of 2-3%. The next meeting is on March 18th and the RBA is widely expected to maintain the cash rate of 4.35%. Thursday will be busy in the US, with the release of retail sales, the producer price index and unemployment claims. Retail sales is often a market-mover and will be closely watched. The markets are expecting a strong rebound in February, with an estimate of 0.8% m/m. This follows a 0.8% decline in January, which was a 10-month low. There is resistance at 0.6702 and 0.6780 0.6590 and 0.6512 are providing support
by OANDA
1
USD/JPY slips after US inflation surpriseThe Japanese yen has looked sharp lately but is considerably lower on Tuesday. In the North American session, USD/JPY is trading at 147.75, up 0.55%. The yen has rallied for five straight days, gaining 2.4% during that time. The US inflation rate crept higher in February. Headline CPI climbed 3.2% y/y, up from 3.1% in January and above the market estimate of 3.1%. On a monthly basis, CPI ticked higher to 0.4%, matching the market estimate and above the January gain of 0.3%. The increase in inflation was mainly due to energy costs, such as gasoline, falling less than expected. Core CPI, which excludes food and energy and is considered a more reliable gauge of inflation trends, ticked lower to 3.8% year-on-year in February, lower than the 3.9% gain in January but above the market estimate of 3.7%. Monthly, core CPI remained steady at 0.4%, above the market estimate of 0.3%. The US dollar responded to the inflation report with sharp swings against the major currencies. The markets have lowered rate cut expectations, as the Fed will be less inclined to lower rates if inflation is moving higher. The Fed is virtually guaranteed to pause at the March meeting and the probability of a June cut has fallen to 66%, compared to 90% just one month ago. The US releases retail sales for February on Wednesday and an unexpected reading could cause further volatility for the US dollar. Retail sales fell to 0.6% y/y in January, compared to a sizzling 5.3% gain in December. The market estimate for February stands at 1%. USD/JPY has pushed above resistance at 147.25 and 147.55, and is testing resistance at 147.93 146.87 and 146.57 are providing support
by OANDA
Macro Monday 36~U.S. Johnson Redbook Index (U.S Retail Sales)Macro Monday 36 The Redbook Index – U.S Physical Retail Store Sales (Released Tomorrow Tuesday 4th March 2024) This Johnson Redbook Index is very useful at providing the most current insights into consumer spending habits in the U.S. It is released every week covering the prior Mon – Sun consumer spend period in physical outlets around the U.S. The index is compiled by Johnson Redbook Service by surveying a sample of 9000 retailers, and tracks year-over-year changes in sales of stores that have been opened for at least one year. The Redbook Index historically tracks sales information from physical stores (Brick and Mortar Stores). Their website describes that they monitor "retail sales" and "same-store sales" which typically refers to physical locations, however some stores also now have an additional online presence, thus in recent years efforts have been made to incorporate some of the online sales data into the index, however this is a secondary and marginal. The Chart The Redbook Index provides the YoY percentage increase or decrease of USD in retail sales in the United States. It is released every week covering the prior Mon – Sun spend period giving a real time read on current consumer spending It being a YoY data release means the percentage change in the Redbook Index is typically measured by comparing the current week's retail sales to those of the same week in the previous year. This calculation is expressed as a percentage to show the increase or decrease in sales over that time period. Example: If retail sales for the current week are $110,000 and sales for the same week last year were $100,000, the percentage change would be * 100, resulting in a 10% increase. The chart above illustrates the following: ▫️ The average % from 2005 to 2024 is 3.59% (black line in middle). We shall use this as our average midline barometer of retail sales. ▫️ Moderate levels of retail sales appear to fluctuate between +6% and -0.1% (white area in the middle). ▫️ We have an Exuberance Zone (Green) for when retail sales were over extended to the upside and a Recessionary Zone (Red) which was penetrated during the last two recessions. ▫️ You can see that in the mid 2000's we bounced off the Recessionary -0.1% zone three times as the index also made a series of lower highs (see arrow). This could be perceived as waning or struggling retail spending ahead of the crash. At present we have a series of lower highs and we have bounced off the Recessionary Level (-0.1%) once, if we see continued lower highs and more bounces from the red zone, this could be a concerning repeating pattern. You will be able to press play on my TradingView page at any stage over coming months to see where this index has moved on this chart. Lets see how this index performs over coming weeks and months. PUKA
ECONOMICS:USRI
by PukaCharts