Nonetheless, this does not draw away from the strength of today's consumer spending report. Retail sales beat expectations, rising 1.1% in the month of March compared to a 0.9% forecast. Although the February figures were also revised up to 0.7% from 0.3%, we pointed out in our Friday note that sales needed to increase 1.5% or more to get investors excited about buying dollars. Excluding auto and gas purchases, sales rose 1.0%, the strongest pace since February 2012. Taking a look at the overall increase in spending since the beginning of the year, retail sales will contribute positive to GDP growth in the first quarter. These good numbers lifted U.S. stocks but should be providing more support to the dollar but unfortunately the greenback won't be able to rise without an increase in yields.
Stocks are performing well today but if earnings continue to surprise to the downside, the rally could recede, adding pressure on USD/JPY. The only hope for the dollar at this stage would be comments from policymakers like Janet Yellen but they want yields to remain low and therefore we doubt they will say anything to threaten the downtrend.
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