Dollar index pulls back from recent highs

Friday, March 13, 2015

Expectations for an impending rates rise in the US were dampened yesterday as easing retails sales in February strengthened the case for keeping rates at their historic lows for longer. Market participants were expecting a rebound in retail sales in February, from -0.8% m/m previously to 0.3% m/m, however, were disappointed with a third consecutive month of falling retail sales as figures slipped -0.6% m/m. Despite significant progress being made in the labour market, with initial jobless claims dropping to 289K during the week ending March 7th from 320K the previous week, the recovery in consumer spending is tentative at best, especially after seasonally strong sales around Christmas and New Year. Accordingly, Fed officials may hold out for fresh data that is free from such distortions but for today’s trading session investors will have plenty to keep them engaged. US PPI data for February as well as the University of Michigan sentiment index will offer market participants further insight into the outlook for the US economy.

The dollar index pulled back from a twelve year high yesterday as retail sales hit prospects for a rates rise in the coming months, buoying stocks higher. After briefly touching 100.00 early on the dollar index slipped back towards 98.654 before partially recovering some of these losses towards the end of the day, ending the session at 99.435. Activity this morning has since seen the index trade below yesterday’s close after opening lower as early moves towards 99.658 failed to gain traction.  

Asian equity indices extended gains during overnight trading with Japanese benchmarks reaching their highest level in 15-years as the recovery on Wall Street sparked an increase in risk appetite. Both the Nikkei 225 and TOPIX indices posted steady gains as a weaker yen continued to offer support, holding above 121.00 against the dollar despite pulling back towards 120.50 yesterday. Market participants are increasingly expecting Japanese policymakers to offer additional monetary easing combined with the anticipation of higher wage rises at the annual spring wage offensive. Investors in the region will continue to take cues from US macroeconomic data releases as well as comments from Fed officials regarding the timeline for an interest rates rise, any bullish prospects on both fronts could offer further support to the recent rally.

DXY pulls back from 100.00

DXY Curncy DOLLAR INDEX SPOT 2015 03 13 07 50 00

NKY 225 rallies to a 15 year high

NKY Index Nikkei 225 Daily 13 2015 03 13 07 29 17

Events for today

0930

UK

Dec

Construction Output

1230

US

Feb

PPI

1400

US

Mar

Michigan Survey

LT:

Apr   Brent Crude (ICE) 

OE: 

Apr Sugar (NYBOT), WTI Crude (Nymex) 

Topics: Inflation, JPY, DXY
More from: Kash Kamal