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Strong data boosts the buck

The US dollar is on the front foot this afternoon after a strong couple of economic releases have signaled strength in the world’s largest economy. The retail sales data for April was far better than expected and the 1.3% rise month on month is the largest increase in six years. The core component of the release also supported the headline in showing a strong figure as a 0.8% rise versus the 0.6% expected was a marked improvement on the prior of 0.4%.

The University of Michigan number also indicated a better than expected level of economic conditions, with consumer sentiment rising to 95.8 from 89.0 last month. Elsewhere BoE member Martin Weale gave a speech at the university of Liverpool during which he stated that "inflation could overshoot target" if the MPC has overestimated the extent of sterling weakness caused by EU referendum.

European stock markets have managed to eke out small gains on their final trading session of the week with the Dax (+0.49%) trading at 9938 on the cash close. Both the FTSE (+0.16%) and Eurostoxx (+0.19%) have followed suit, but the former has now posted 4 successive weekly declines. US markets are mixed at present with the US500 (-0.07%) lower and the US100 (+0.32%) higher.

It’s been a remarkably quiet end to the week for crude benchmarks after some volatile trade so far. Brent (-0.25%) and WTI (-0.59%) are both slightly lower but both remain not far from their weekly highs. Gold (+0.54%) has gained despite the stronger us data, and the precious metal trades $1270.47/oz on the European close. 

The greenback is the big gainer today in currency space with USDCAD (+0.83%) reflecting this. Both the EURUSD (-0.76%) and the GBPUSD (-0.56%) are noticeably lower and today’s data may be the starting point for a sustained appreciation in the buck. the ERUGBP (-0.17%) cross has is slightly lower and on course to end the week for the second time in a row.

Looking ahead there’s Chinese industrial data out over the weekend before we can expect some drop off in volume on Monday as the Germans, French and Swiss take a bank holiday. Tuesday is arguably the most packed with economic releases as UK CPI at 09:30 and the US equivalent at 13:30 could be major market moving events. Finally the release of the FOMC minutes on Wednesday at 19:00 has the potential to be major and if they are less dovish than recent rhetoric form the rate-setting body then we could see further upside for the US dollar. 


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