Can the upcoming US retail sales and CPI reports change the tide for USDJPY?

by | November 15th, 2017, 12:47:08 | News

Big data ahead for the dollar

If you’ve seen the calendar today, you’ll know that there’s big data due at 13.30 GMT.

October 2017 Retail sales and CPI are due, and coming ahead of an expected hike next month, are going to be very important. Here’s the key expectations;

CPI

  • 2.0% exp vs 2.2% prior y/y
  • Core 1.7% exp vs 1.7% prior y/y
  • Real average weekly earnings -0.1% exp vs -0.1% prior m/m
  • y/y 0.6% prior
  • Real average hourly earnings 0.7% prior y/y

Retail sales

  • 0.0% exp vs 1.6% prior m/m
  • Ex-gas 0.5% prior m/m
  • Control group (core) 0.4% exp m/m. Prior 0.4%

Last month CPI held up fairly well but there was a lot of focus on short-term price gains due to the hurricanes. Gasoline up 13.1% was testament to that. That opens the door to see a softer number today, thus the 2pip lower expectation. The danger is that it’s worse than that. August was 1.9% so a print under there will mean trouble. As usual, focus will also be on the wages numbers.

As we know, retail sales can be volatile so use them as a means of aiding or slowing what happens in the dollar due to the CPI numbers.

What’s on my mind is how we match the data against today’s FX moves. USDJPY seems under constant pressure and bad numbers could be the straw that breaks the camels back. On the other side, will good numbers bring a complete about change or will it be seen by sellers as an opportunity to hit a rally? Only a proper miss in CPI will potentially hit Fed hike expectations, so look for a miss of 2pips or more for that to happen. On or around expectations will keep the status quo (with the market already expecting a hike). A beat of 2pips or more will see the dollar gain.

On balance, I see a greater chance of USDJPY falling and/or being sold on a rally, than I do seeing these intraday moves turning around completely. At best it might put a temporary floor in but if any rally can’t break above 113.25, it will be in trouble.

 

Ryan Littlestone
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