EUR/USD Shrugs Powell Interview - Eyes German Data, US Retail Sales

TALKING POINTS – EUR/USD, US RETAIL SALES, GERMAN INDUSTRIAL ORDER

• US retail sales may give EUR/USD boost

• Will German industrial production falter？

• Muted market response to Powell interview

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The Euro was battered last Thursday after the ECB not only decided to hold rates but subsequently introduced new liquidity provisions in an effort to counter slower-than-expected growth. The central bank also cut inflation forecasts for 2019, 2020 and 2021 while warning of greater geopolitical uncertainty. The upcoming European Parliamentary elections may soon put the Euro in the global spot light.

The following day – as expected – German factory orders undershot expectations. However, the response was relatively muted, likely as a result of the financial hangover caused by the ECB. On March 8, however, the pair was given a boost and offered a mild recovery to the exhausted Euro. US non-farm payrolls came in at 20K, significantly missing the 180K estimate and sent the US Dollar down against all its major counterpart

Earlier on March 10, Fed Chairman Jerome Powell was interviewed on 60 Minutes, but his comments did not elicit a strong market reaction. His commentary did not significantly deviate from his previous message of patience and vigilance on developments from abroad which may affect the US outlook e.g. China, Brexit.

German industrial production is expected to fall short of expectations as the largest Eurozone economy cools, and US retail sales may disappoint. Economic data coming out of the US for the past few weeks has been broadly missing estimates as the global economy slows down. If this trend continues, it may tilt the Fed to a more dovish angle to accommodate the economic circumstances and potentially push the US Dollar down.

Conversely, the US Dollar may gain as investors risk appetite sours and haven demand rises amid an uncertain outlook. The Greenback in this regard has a unique nature: it has the capacity to gain in times of risk aversion – even if the cause of uncertainty is coming from the US – and when local economic data outperforms. However, this time, the risk may not be directly emanating from home, but from abroad.

CHART OF THE DAY – DOLLAR SUFFERS AS US NON-FARM PAYROLLS DISAPPOINT