The greenback has strong support today from the US retail sales of May which came up by a full 1% and the market was expecting an increase by just .5%. there can be a close picking up of consuming after series of drawdowns since the beginning of the housing slump and its negative impact on the crediting market and consuming confidence in US.
The recent announcements by the Fed's President Bernenke have indicated the inflation risks which resulted from the dollar weakness which resulted from the needed series of interest rate cuts to stimulate growth and in the face of this risk the treasury secretary Paulsen has said that he would never take FX intervention off the table. Today's US import price index has increased by 17.8 y/y showing how much the inflation risks are accumulating after 3 consecutive months of rising and So, May CPI which is expected to increase by .5% from .2% in April will be closely watched as the market wants to evaluate these current inflation upside risks which can lead to hike interest rate in US again after the recent optimistic comments from Ben Bernenke that the growth downside risks have diminished over the past month or so and the fed now will strongly resist an erosion of longer-term inflation expectations.
The fed's effort to tackle inflation can support the greenback but the market needs to watch further good data to buy this prospect that the growth downside risk is diminishing pushing the greenback higher.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com