Retail Sales Sink in Feb 

The US Dollar was seen falling deeper yesterday as the latest US retail rales further strengthened the view that the Fed is likely to opt for a smaller hike when it meets next week. On the back of a set of weaker February inflation figures, retail sales were seen falling into contractionary territory yesterday. Headline retail sales printed -0.4%, down from 3.2% in January while core retail sales printed -0.1%, down from 0.1% in January. Both readings were sharply lower than the prior month and came in below market estimates also.

Alongside this data we also saw February PPI missing targets with headline PPI at -0.1%, down from 0.3% prior and expected and core PPI at 0%, down from 0.1% prior and 0.4% expected. Finally, the Empire State Manufacturing Index printed -24.6 down sharply from the prior -5.8 and deeper than the -7.9 figure the market was looking for.

March FOMC Pricing Falls Further 

In all, it was a dismal day for US data which serves only to strengthen the view that the Fed will be far less hawkish than many were projecting last month on the back of hot January data. Market for the March FOMC is now around 67%/33% in favour of a .25% hike vs no hike at all. This is down from around 80%/20% at the start of the week and will likely fall further if market turmoil continues around banking sector fears.

Technical Views

USDJPY

For now, USDJPY continues to sit on support at the 132.91 level following the correction lower from the bull channel highs. While this level holds, the bull view remains intact. However, should price slip back below here, 127.24 is the next support to note with a test of channel lows coming in just ahead of that.