Mid-Week Data and Reversion to STEER™ Could Boost USD – BNPP
Research Team at BNP Paribas, suggests that the USD’s recovery vs the
EUR and JPY continued overnight and is taking support from a recovery of
US front-end yields.
“The rebound in the oil price and improving China trade data overnight have boosted risk appetite with the commodity currencies holding onto their gains against the USD and Asian equity markets up firmly overnight.
Today the focus will shift to US data where our economists are not far from market consensus looking for a reasonably robust 0.4% m/m gain in control group March retail sales. While this would be an improvement over the previous two months, it would be consistent with fairly subdued 1.8% q/q saar consumer spending growth in Q1, while their overall forecast for Q1 GDP growth continues to track around 0.8% q/q.
Given that the market is quite short USD against the EUR and JPY, and with the CPI also likely to be on the firm side on Thursday, we expect the USD’s corrective recovery against the core majors to extend a little further this week. BNP Paribas STEER™, our short-term fair value model, concurs with this view and yesterday triggered a short EURUSD signal targeting 1.1207. Typically it takes 1-2 weeks for an exchange rate to revert back to its STEER™.
Beyond this, we remain sceptical however that the US currency can generate a sustained upswing as long as Fed communication continues to supress a repricing of Fed tightening. On Tuesday, Philadelphia Fed President Harker echoed earlier comments by Dallas Fed President Kaplan saying it was prudent to wait for stronger inflation data before hiking again.”