Don’t forget the slew of central banks this week

Outlook

Today it’s retail sales. The Trading Economics chart shows a drop starting in the summer and has a forecast of a mere 0.3%, but the National Retail Federation isn’t bothered one bit. They say on their website “NRF forecasts that retail sales during 2025 will grow between 2.7% and 3.7% over 2024 to between $5.42 trillion and $5.48 trillion. Last year, annual retail sales grew 3.6% over 2023 and totaled $5.29 trillion. The 2025 forecast is in line with the 10-year average annual sales growth of 3.6% prior to the pandemic.” See the NRF chart.

Tomorrow it’s CPI but we already know it will be a tad higher, ho hum. Still on the agenda is which Kevin gets the Fed chief job, which can come at any moment. Trump’s credibility problem extends to the new Fed chief. Commentators note the issue is not affecting financial markets—yet.

Don’t forget the slew of central banks this week—BoE, ECB and BoJ but also Sweden and Norway. Probably the most important is the BoJ, which seems almost certain to hike on Friday (actually late Thursday in New York) but with what kind of aura? The usual answer is to fight inflation, but Mr. Ueda has not been stressing the point and Japan has a huge debt to be financed at costs that have already risen substantially. The astute Donnelly says “We are nearing 2% on the 10-year in Japan and the 1.85%/2.00% area has been an extreme and a pain point since the 1990s. As such, I would not be long JPY into BOJ. I don’t think Ueda will be hawkish.”

Forecast

The Dollar trend remains to the downside but it’s terribly jittery and keeps thrusting upward for no real reason. It spent Oct and half of Nov in an upmove that nobody could explain, including us, and is now retreating. For what it’s worth, the 200-day is 101.48. The MACD points down.

Against the euro, the main component of the dollar index, the 20-day moving average is 1.1641 and the ATR breakout line is a little higher at 1.1648. We think those are the worst-case scenarios. The Schaff indicator points down. This is the opposite of what is expected when the dollar index MACD is pointing down and the euro’s adjusted-MACD Schaff is also pointing down. Both things should not be true at the same time.

No wonder we are all confused. As noted before, there are umpty-seventeen reasons to sell the dollar and only two to hang on to it—the yield rising at some point and the robust economy. It will take a crisis (like the stock market bubble bursting or a shooting war) to drive the gambling-besotted markets to flee back into the dollar safe-haven.