Forex Major Currencies Outlook (May 13, 2014)

There were no major reports released from the US economy, although the Federal budget balance showed a weaker than expected result. US headline and core retail sales data are up for release today and a weaker increase compared to the previous month’s data are expected. Headline retail sales might tick up by 0.5% while core retail sales could show a 0.6% gain.

EUR

The euro consolidated to the dollar and pulled up a bit to the Japanese yen as traders tried to evaluate their bias for the euro prior to the top-tier data this week. There were no reports released from the region yesterday and only the German ZEW economic sentiment figure is due today. The index could dip from 43.2 to 41.3, reflecting more pessimism in the country.

GBP

The pound edged lower to the dollar in recent trading but recovered to the Japanese yen. The BRC retail sales monitor showed a 4.2% rebound from the previous 1.7% decline, just enough to support the pound against most of its other forex counterparts. There are no major reports lined up from the UK today so it should be all about positioning ahead of tomorrow’s UK claimant count change release and BOE inflation report.

CHF

The franc continued to lose ground in recent trading despite the 3.0% jump in retail sales. The previous month’s figure was also revised to show a 1.2% annual gain, up from the initially reported 1.0% increase. There are no reports due from the Swiss economy today so franc pairs might be in for a bit of consolidation or more weakness if risk sentiment picks up.

JPY

The yen bowed down to most of its major counterparts when risk appetite improved in the Asian trading session. The Economy Watchers sentiment in Japan, however, showed a shift from optimism to pessimism for the economy. There are no reports due from Japan today so make sure you watch how the Nikkei closes to see how risk sentiment could impact yen pairs in the next trading sessions.

Commodity Currencies (AUD, NZD, CAD)

The comdolls managed to hold steady in recent trading, thanks to the lack of market updates. NAB business confidence in Australia had a small improvement from 4 to 6 but the Aussie’s gains were erased today when both HPI and home loans data showed weaker than expected results. Coming up is New Zealand’s quarterly retail sales data, which might show a 0.9% uptick for both the headline and core figures.  Chinese industrial production, fixed asset investment, and retail sales are also lined up for today. Another round of weak data could trigger risk aversion and be negative for higher-yielding commodity currencies.

By Kate Curtis from Trader's Way