Daily Market Update

Dollar Falls on Retails Sales; June Fed This Afternoon

June 14, 2017



The U.S. dollar was mostly quiet overnight but is losing early this morning on a slew of disappointing data and scary breaking news. At the time of writing, reports have come in that a Congressman, an aide and a Capitol police officer were shot a baseball practice in Alexandria, VA. The story is developing, but the safe-haven Japanese yen has rallied on the news.

The greenback is under added pressure on a drop in retail sales. Sales fell in May by the most since early 2016 with declines in sales of motor vehicles and electronics. The 0.3% contraction failed to meet expectations of a flat reading. A further breakdown of the numbers shows that sales were down nearly across all sectors.

Consumer inflation data was also slightly off. The Consumer Price Index fell 0.1% on a month over month in the month of May, failing to meet estimates of a flat reading. Year over year also dipped lover to 1.9%.

Attention will now shift back towards the Federal Reserve who will release their interest rate decision at 2:00 p.m. today. It is widely expected the FOMC will boost borrowing costs by 25 basis points. At 2:30p.m. Fed Chair Janet Yellen will hold a news conference to explain the decision. Traders will parse her words for clues on further rate hikes and how she plans on shrinking the Fed’s balance sheet. With a rate hike expected, a slightly dovish press conference could add to the dollar’s woes.



The Canadian dollar has continued its run against the U.S. dollar. The loonie is now 2.5% stronger against the U.S. dollar since Friday, despite softening oil prices overnight. With WTI trading above $45 a barrel, the Canadian dollar has found room to run. In addition, traders are now fully pricing in one additional rate hike by the Bank of Canada in the next twelve months.



The British pound came under short-term pressure overnight but has since pounced on the dollar’s weakness. British wages grew at the slowest pace in two years. Average earnings rose 1.7% in the three months through April. But once inflation is taken into account, earnings fell 0.6%, the largest drop since August 2014. Focus will now shift to Thursday’s Bank of England meeting.

The Sterling has now recovered all of its post-election losses.

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