Traders await U.S. inflation data and retail sales amid holiday thin trading

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With most of the major trading hubs closed today on account of the Good Friday bank holiday, the markets could remain choppy amid thin trading. The North American trading session will see the release of the inflation data for the month of March.

Following the decline in the U.S. dollar spurred by President Trump’s comments who said that the currency was getting too strong, today’s inflation report could offer some respite for the Greenback.

Mr. Trump was speaking with the Wall Street Journal where his comments sent the dollar tumbling. In the interview, the U.S. President was also seen taking a soft stance on China as he said that he would not label China as a currency manipulator.

Mr. Trump’s comments come ahead of the U.S. Treasury department’s report on the currency markets. The U.S. has repeatedly singled out Japan, China and Germany, falling short of calling them currency manipulators.

While the dollar fell following Trump’s comments this wasn’t new for the markets as the President had previously vouched for a weaker U.S. dollar earlier in February and soon after taking office.

It took combined efforts from the then Treasury secretary candidate, Steve Mnuchin and the Fed Chair Janet Yellen whose hawkish comments managed to reverse the losses in the Greenback.

Headline inflation expected to remain soft, but core inflation expected to stay firm

Data released by the Bureau of Labor Statistics today is expected to show a slight moderation in consumer prices for March. Economists surveyed expect to see a flat print in headline consumer prices on a month over month basis.

U.S. Inflation Rate - February 2017
U.S. Inflation Rate – February 2017

Excluding food and energy prices, the core CPI is expected to rise 0.2%, rising at the same pace as in February. Besides the inflation figures, retail sales numbers are also coming out at the same time.

Economists have penciled a headline increase in retail sales of 0.1% and a 0.2% increase on the core retail sales, which is

Following the surprisingly weak print in the official payrolls report which saw the U.S. economy add only 98,000 jobs in March, the outlook for inflation and retail sales has also dampened.

While other measures of inflation such as the PCE and PCE core hit the 2% threshold for the first time in five years in the month of February, the gains were partly driven by higher fuel and energy prices which have been steadily increasing since the onset of the winter season.

The decline in the inflation rate is expected amid weaker oil prices in the month of March. On a year over year basis, the consumer price index data is tipped to show an increase of 2.6%, this is slightly below the 2.7% increase registered in February.

Despite the expectations of a slight drop in the headline consumer prices, the core inflation rate is expected to rise 2.3% on a year over year basis, advancing from 2.2% seen in February.

Combined, the inflation data is unlikely to dent the sentiment in the market, but a bullish beat on the estimates could potentially offer some support to the U.S. dollar.

With majority of traders also closed on account of the Good Friday holiday, the markets could remain trading in a thin trading environment which could lead to some erratic market movements.

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