Dollar catches a bid after decent U.S. retail sales data

Market Review - 15/06/2019  13:25GMT  

Dollar catches a bid after decent U.S. retail sales data

Despite trading sideways in Asia and European morning on Friday, the greenback climbed shortly after New York open as traders bought the dollar broadly after release of in-line U.S. retail sales together with upward revisions to previous readings.  
  
U.S. retail sales rose 0.5% in May; April reading raised to 0.3% gain while core retail sales increased 0.5% and April revised up to 0.4%.  Reuters reported U.S. retail sales increased in May and sales for the prior month were revised higher, suggesting a pick-up in consumer spending that eased fears the economy was slowing down sharply in the second quarter.  
The fairly upbeat report from the Commerce Department on Friday followed a raft of weak data, including a step-down in hiring in May and tame inflation readings, that have led economists to believe that the Federal Reserve will signal a rate cut later this year when policymakers meet next week.  
  
In other news, Reuters reported Reuters then reported U.S. President Donald Trump said on Friday "it doesn't matter" if Chinese leader Xi Jinping attends the Group of 20 summit later this month, predicting a trade deal with Beijing would occur at some point anyway.   "We're going to see. Eventually they're going to make a deal," Trump said in an interview with Fox News Channel.     
Trump repeatedly said he would meet with Xi at the summit, although China never confirmed the meeting.   
  
Versus the yen, although the pair remained on the back foot in Asian morning and fell from 108.36 (Australia) to 108.17 in early European morning, release of fairly upbeat U.S. retail sales data triggered broad-based rise in the greenback due partly to intra-day strong rebound in U.S. treasury yields. Dollar later climbed to session highs of 108.58 and closed near there.  
  
The eur/usd moved sideways initially following losses in last 2 sessions and despite a recovery to 1.1289 on short covering in early European trading, euro tumbled on the back of usd's broad-based rally after U.S. retail sales, price easily penetrated 1.1252 sup and hit a 1-week trough of 1.1203, price last traded at 1.1207 near the close.  
Reuters reported the Vice President of the European Commission Valdis Dombrovskis said on Friday that Italy needed to adopt new measures to comply with European Union fiscal rules and avert a disciplinary action that could lead to fines for the government in Rome.   "It is for Italy to come forward with some additional elements, measures that could be taken into account before taking next procedural steps," Dombrovskis said, minutes after Italy's finance minister Giovanni Tria had said he did not think new measures were necessary to comply with EU rules.   
  
Reuters also reported Italy should clarify in the next few days how it intends to avert a European Union disciplinary action over its soaring debt, French Finance Minister Bruno Le Maire said on Friday.   
He spoke after Italian Finance Minister Giovanni Tria explained Rome's public finances to euro zone counterparts at a meeting in Luxembourg. The EU has said there is room to open a disciplinary procedure against Italy, which could lead to fines.  
  
Versus the British pound, cable move narrowly with a soft undertone following weakness in previous 2 sessions. Price dropped in European morning due to broad-based selling in sterling and intra-day decline gathered momentum after release of U.S. retail sales, the pair tumbled to a near 2-week trough of 1.2580 and last traded at 1.2592 near the close.  
  
Economic data to be released on Monday :  
  
EU labour costs, New York Fed manufacturing index and NAHB Housing Market index.