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US Dollar Index lower on weaker-than-expected retail and CPI prints

BY SHAMEEM MUSA

The Australian Dollar crept marginally higher through trade on Friday breaking briefly through 0.74 before edging lower into the close. Having touched fresh four month lows midweek, the AUD found support late Friday after U.S inflation and retails sales data fell short of market expectations and cast a shadow over speculation surrounding Federal Reserve monetary policy action. Having tested resistance at 0.7415 the AUD failed maintain gains with investors reluctant to push any upward rally in the face of broader bearish trends. As attentions this week turn to RBA minutes and labour market data a move back through 0.74 could signal a short term relief rally and push toward 0.7450/0.7480 while a soft print and dovish RBA board could force the Aussie through support at 0.7310, signalling a deeper correction and moves through 0.73 and 0.72.

The New Zealand Dollar was hit by a wave of selling pressure late last week as the RBNZ kept interest rates on hold at 1.75%. The monetary statement by a dovish RBNZ was the main catalyst for the drop as news of soft wage growth and expected weaker inflation did no favours to the NZD/USD cross. In a relatively light trading session on Friday, Business NZ Manufacturing Index dipped for the month of April, remaining though in expansion territory as construction remained strong in Christchurch and Auckland’s strong housing market. Despite dipping to an 11- month low of 0.6820, the Kiwi was uplifted to 0.6870 by a round of weak inflation data and retail sales in the United States. This morning NZ Retail Sales figures for the quarter are released as the New Zealand Dollar opens this morning at 0.6860 against its US counterpart.

 The Great British Pound opened this morning slightly weaker when valued against its US Counterpart with the pair retreating from a previous session high of 1.2892. Over the last two weeks the Pound Sterling has traded within a 160-point range with the Greenback, however that may all change this week as the UK macroeconomic calendar will be quite busy over the next few days. On Tuesday, will see the release of April CPI and PPI figures, monthly employment data on Wednesday, and rounding off the week Retail sales figures on Thursday.  The GBP/USD pair is currently trading at 1.2886. We now expect support to hold on moves approaching 1.2840 while any upward push will likely meet resistance around 1.2930.

The Greenback experienced a pullback across the board on Friday after weaker than expected CPI print and retails sales came in below consensus expectations. US CPI came in slightly weaker on the core measure, headline CPI inflation rose 0.2%, while core inflation rose a modest 0.1%. Retail sales lifted 0.4% in April, which missed consensus expectations of 0.6% increase. With US labour markets still strong, the softer-than-expected CPI prints from the past two-months are unlikely to deter the Fed from hiking rates. EUR/USD moved above 1.09 to an eventual high of 1.0934, USD/JPY pulled back from a two-month high with Yen benefiting from safe-haven flows and currently buying 113.30 Yen.