Greenback Turns Green

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Market Drivers May 7, 2018
UK Bank Holiday
EZ data remains soft
Nikkei -0.03% Dax 0.30%
Oil $70/bbl
Gold $1312/oz.
Bitcoin $9400

Europe and Asia:
EUR EZ Retail PMI 48.6 – 17 month low
EUR EZ Sentix 19.2 vs. 21.1

North America:
No Data

The dollar bid came back in Asian and early European trade today with the buck making steady progress against all the majors in relatively thin and quiet trade.

With UK on bank holiday today, dealing in London was a little choppy, but the greenback held on to its gains from a rally in late Asian session trade which saw USDJPY pop 50 points from it session lows of 108.75 while EURUSD inched towards 1.1900 once again.

Despite the lackluster NFP report on Friday, the greenback was back in vogue as data from the rest of the G-7 universe proved even worse. Friday’s payroll report missed on all fronts, as jobs, revisions and average hourly earnings all missed their mark. Nevertheless, the data was still expansionary showing tepid but positive growth.

In contrast, today news from the Eurozone only added to the sense of dread in the region as consumer spending slowed materially. The EZ Retail PMI printed at 48.6 dropping below the key 50 boom/bust level and hitting a 17 month low as a result.

According to Alex Gill, an economist at IHS Markit which compiles the Eurozone Retail PMI, “The latest data highlighted a disappointing month for the eurozone retail sector. Monthly sales were down for the first time for over a year as signs of restricted consumer demand and increased uncertainty begin to show. This was particularly evident in Italy, where the rate of decline in like-for-like sales accelerated sharply and was the most marked for the better part of two years. “Forward-looking indicators add to the dull picture, with falls in purchasing activity and stocks of goods suggesting retailers are taking an increasingly cautious approach to their business operations. The one shining light was a further rise in staffing numbers. That said, without a rebound in customer demand we may see employment slip back into contraction territory in the coming months as well.”

With no data on the North American calendar today, ranges may remain tight. The key events in US this week will deal with inflation data which is expected to rebound in April and could provide greenback with a further boost as the week proceeds. For now, having bounced off the 109.00 support, the buck remains bid for the day and if North American corps decides to extend the move it could test 109.50 in USDJPY and the key 1.1900 figure in EURUSD as the day progresses.

Boris Schlossberg
Managing Director

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