The US dollar and Japanese yen made headway once again on Friday as risk appetite remained uneasy. There were a variety of US economic releases, which offered mixed results.
First, the US trade deficit unexpectedly narrowed to $25.962 billion during May thanks to a 0.6 percent drop in imports and a 1.6 percent rise in exports as the US dollar plunged. Meanwhile, import prices rose for the fourth straight month in June at a rate of 3.2 percent, which was the single biggest monthly increase since November 2007. However, deflation concerns weren’t completely pushed aside as the year-over-year rate of import price growth remained near the record low of -17.5 percent at -17.4 percent. Finally, the Reuters/University of Michigan consumer confidence index unexpectedly dove down to 64.6 in July from 70.8, with a breakdown of the report showing that sentiment soured on both current conditions and the economic outlook.
Looking ahead to next week, the Commerce Department is forecasted to report on Tuesday that US retail sales rose 0.4 percent in June, which would mark the second straight improvement, and excluding autos, retail sales are anticipated to increase by 0.5 percent. However, there is potential for a worse-than-expected result, as the International Council of Shopping Centers (ICSC) said that same-store sales tumbled 5.1 percent in June from a year earlier, which was the sharpest decline since March.
The main event risk for the US dollar on Wednesday will be the release of the minutes from the Federal Reserve’s last meeting on June 24. Following that meeting, the markets saw no surprises from the Federal Open Market Committee (FOMC), as they left the fed funds target range at 0.0 percent - 0.25 percent and made no changes to their quantitative easing (QE) program. The status of QE is high on the minds of traders, so the comments contained within the minutes will be scoured for indications that they will increase their purchases of Treasuries, and if they are found, the US dollar could fall sharply.
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