Intraday Market Thoughts

Retail Sales Beat Estimates But USD Falls on Repatriation

by Adam Button
Apr 16, 2012 23:21

A strong US retail sales report was balanced by a sharp fall in the Empire Fed. The US dollar fell in North American trading and the yen was the best performer on the day. The RBA minutes are the highlight of the upcoming session. Latest Premium Intermarket Insights on EURUSD, EURJPY, AUDUSD, gold & US crude oil are below.

US retail sales climbed 0.8% in March compared to the +0.3% expected. Excluding autos and gas, sales rose 0.7% compared to +0.5% expected. Weather effects continue to plague analysis of economic news as some market watchers blamed an outside gain in building materials for the gains.

Separately, the Empire Fed dropped to 6.56 from 20.21, well short of 18.0 expected. The details of the report were less gloomy than the headline as new orders were flat and employment picked up.

The market entered US trading amidst heightened concerns about Spain after 10-year yields rose as high as 6.16%. Spain is considering seizing power from regional governments who have been unable to trim deficits. Worries about Italy also arose as leaders delayed the release of public borrowing forecasts.

But worries about the European crisis were brushed aside in US trading as EUR/USD surged to 1.3148 from 1.3025 on what could be repatriation of funds by European banks to relieve the tension on the latest market woes. The move left many market watchers without answers but many fingers were pointed at repatriation flows. Ultimately, if periphery yields continue to rise, the euro will fall.

The highlight of Asia-Pacific trading are the RBA minutes at 0130 GMT. The central bank was dovish in the statement and further comments that suggest rate cuts will weigh on the Australian dollar.

Another report to note comes at 0430 GMT when Japan releases final February industrial production data. The initially reported +1.5% y/y reading is not likely to be significantly revised. A meeting of Japan’s cabinet may also include renewed talk of yen intervention.

The last time we had 6 consecutive monthly declines in the VIX was in 2003, which was also the end of the Feds easing campaign following the 2000 tech bubble. S&P500 is down 3.3% from 4-year high. But 7% is the maximum decline the index has posted without making any deeper correction. Find out what it means for our latest Intermarket Premium Trades Nonsubscribers can join here:


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