Dollar consolidates ahead of US retail sales as rate hike bets stall – Forex News Preview
- Raffi Boyadjian
Expectations about how many times the Fed will raise rates this year have taken a bit of a pause over the past 10 days or so, having surged at the start of the month. The Fed has signalled that it won’t go faster than 50 basis points – at least not in the June and July meetings. September is a different story, but if the early signs that inflation may have started to peak take further shape until then, rate hikes could slow to 25 bps increments in the autumn.
However, even in that ‘optimistic’ scenario, the tightening in financial conditions since the beginning of the year when the Fed was still buying bonds would be very sharp by historical standards. It shouldn’t be surprising therefore that even if Fed rate hike expectations are levelling off, the risk of a substantial slowdown in economic growth remains elevated.US consumers are still spending
The US economy unexpectedly contracted in the first quarter, and although this was mainly down to technical factors such as declining inventories, a hit to consumption by the jump in the cost of living could drag on Q2 GDP. Two successive quarters of negative growth are technically defined as a recession – something that the Fed wants to avoid. However, persistently high inflation is even less desirable, not just by policymakers, but by the public as well.
For now, the world’s largest economy remains in relatively good shape, showing very few strains from the spike in energy prices and the broader turmoil caused by the war in Ukraine. In particular, the main driver of the American economy – the consumer – has kept spending throughout these latest economic and geopolitical storms.
Retail sales rose by 0.7% m/m in March and they are projected to have climbed even more strongly in April, by 0.9% m/m. One of the core measures, the control group of retail sales that’s used in GDP calculations is forecast to have risen by a healthy 0.5% m/m pace following March’s upwardly revised 0.7% gain.Dollar is off its highs
The data could give the dollar a leg up as long as they don’t disappoint, while better-than-expected figures might revive bets of further hawkish tilts to come from the Fed. The greenback is currently testing the 129 level against the yen, easing from last week’s two-decade high of 131.34. The bulls are likely to meet resistance at 130 if they attempt to re-challenge that top. If successful, the 161.8% Fibonacci extension of the May downtrend at 133.71 would become the next upside target.
However, if retail sales aren’t as strong as is being predicted, dollar/yen could slip towards key support in the 127.50 area. A negative surprise cannot be ruled out as consumer surveys have been less robust than the hard data lately. The University of Michigan’s consumer sentiment index has been trending lower since the second half of 2021 and plummeted to depths not seen since October 2011 in the preliminary reading for May.Is the housing market a concern?Another risk for the dollar this week is the possibility of evidence that the Fed’s rate increases are starting to hurt the housing market. Building permits and housing starts for April are due on Wednesday, followed by existing home sales on Thursday. There are some signs that property demand is slowing as mortgage rates go up, so a further indication of this could see the dollar rally and rate hike speculation cooling again.
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.