The USD on the Rise, with FED Talk in Focus this Afternoon

Earlier in the Day:

Economic data released through the Asian session this morning included New Zealand’s 4^th quarter retail sales numbers and January inflation figures out of Japan.

For the Kiwi Dollar there was some good news, with retail sales surging by 1.7%, quarter-on-quarter, coming in ahead of a forecasted 1.4% rise and 3^rd quarter 0.2% increase. Core retail sales was even better, rising by 1.8% against a forecasted 0.7% increase, following a 3^rd quarter 0.6% rise.

According to StatsNZ, out of the 15 retail industries, 11 recorded higher sales volumes, with the F&B sector seeing the largest increase, up 3.7%, more than reversing a 3^rd quarter 2.6% fall. On the downside, Accommodation was the largest drag, down 2.3%, which partially reversed a record 6% rise in the 3^rd quarter.

The Kiwi Dollar moved from $0.73318 to $0.73418 upon release of the figures before going into reverse, with the Kiwi Dollar down 0.59% to $0.7299 at the time of writing.

For the Yen, January inflation figures may have been better than forecasted, but with the annual rate of core inflation siting at 0.9%, there’s certainly little impetus for the Bank of Japan to begin shifting on monetary policy any time soon.

The Yen moved from ¥106.728 to ¥106.776 against the Dollar upon release of the figures, with tepid wage growth and soft domestic consumption continuing to place downward pressure on inflation. At the time of writing, the Yen was down 0.22% to ¥106.98 against the Dollar.

For the Aussie Dollar, there were no material stats leaving it at the mercy of the U.S Dollar, which was on another run through the early part of the session, leaving the Aussie Dollar down 0.22% at $0.7829, the Aussie Dollar recovering from an intraday low $0.7817.

In the equity markets the ASX200 managed to touch 6,000 levels before ending the day up 0.82% at 5,999.79, with the Nikkei up 0.72% by the close, supported by a softer Yen. At the time of writing, the Hang Seng and CSI300 were also in positive territory, up 0.91% and 0.13% respectively, with the recovery in the U.S equity markets providing much needed support through the session.

The Day Ahead:

After another day of negatives for the EUR from a data perspective, stats out of the Eurozone this morning include the Eurozone’s finalized January inflation figures and Germany’s finalized GDP numbers for the 4^th quarter.

Based on forecasts, the finalized GDP numbers are forecasted to be in line with 1^st estimate numbers, with any deviation likely to have a greater impact on the EUR ahead of the inflation figures later this morning.

On the inflation numbers, while finalized headline inflation is forecasted to be in line with prelim figures, the annual rate of core inflation is forecasted to rise to 1% that could provide the EUR with some upside upon release.

The markets will be conscious that the ECB minutes released on Thursday noted that there could be a near-term shift in forward guidance on the asset purchasing program. An uptick in core inflation would certainly bring that forward.

At the time of writing, the EUR was down 0.22% to $1.2303, weighed by the market reaction to the less hawkish than expected ECB minutes.

Following some disappointing 2^nd estimate, 4^th quarter GDP numbers out of the UK on Thursday, there are no material stats out of the UK this morning to provide direction for the Pound. The Pound had benefited from a softer Dollar on Thursday, coupled with the fact that the downward revision to the GDP numbers was attributed to a greater than initially estimated disruption to Oil & Gas production in December.

At the time of writing, the Pound was down 0.06% to $1.3947, with near-term direction now hinged on macroeconomic data ahead of the resumption of Brexit negotiations next month.

Across the Pond, it’s a quiet day on the data front, leaving the Dollar in the hands of FOMC members Dudley, Mester and Williams, with any hawkish chatter expected to be Dollar positive, with the Dollar bouncing back from Thursday’s fall, currently up 0.19% to 89.909.

For the Loonie, following some particularly weak December retail sales figures on Thursday, focus shifts to January inflation figures due out this afternoon. If the retail sales figures are anything to go by, the Loonie could be in for another tumble, with the annual rate of inflation forecasted to fall from 1.9% to 1.4% last month.

At the time of writing the Loonie was down 0.06% to C$1.2713 against the U.S Dollar.