Events Testifying Economic Outlook

It is a very busy day for the United States, as the world’s leading economic nation is set to release two sets of very important figures, the monthly CPI and monthly Retail Sales.

At half past one this afternoon, the Census Bureau will release Retail Sales and Core Retail Sales for March. Economists predict retail sales will increase by as much as 1.1%, the biggest increase in four months as better weather and hiring pick up.

The market also predicts that core retail sales will increase by 0.5%. Published at the same time as retail sales, the Bureau of Labor Statistics will release the CPI and core CPI for March. Inflation is the key to raising the interest rate, and boosting the value of a currency; however, economists predict that CPI will increase by 0.1%, after remaining unchanged last time.

Core CPI, which is closely watch by the Fed, is predicted to increase by 0.1%- exactly like last month.
Later today, Fed Chairman Ben Bernanke will testify before the Joint Economic Committee on Capitol Hill. Last night, Bernanke addressed the National Bankers Association. While the Fed Chairman did not comment on the current economic conditions or on the Fed’s interest-rate policy in yesterday’s speech, today he is expected to discuss his economic outlook for the U.S, and explain why he is unwilling to raise the interest rates.

Yesterday, the bureau of Economic Analysis reported that the U.S trade deficit widened in February to $39.7 billion further adding to evidence of a rebound in the country’s economic growth and effect on forex online outputs. The trade gap, which surpassed market expectations of $38.5billion, increased 7.4% from a revised $37billion in January.

Imports climbed 1.7% as Americans bought more computers and televisions abroad, while exports rose to its highest level since October 2008. The need to replenish depleted inventories and gains in consumer spending mean purchases of goods and services from overseas will keep growing in coming months. Exports will probably also advance as global growth accelerates, giving companies across the board a boost.

Also out yesterday, the Bureau of Labor Statistics reported prices of goods imported into the U.S rose less than anticipated in March, indicating few signs of building inflation pressures from abroad. While markets had expected a 0.9% increase, the report showed a 0.7% increase in the import-price index, which follows a revised 0.2% drop in February.

Following the release of the data, the U.S. dollar was down against the Yen, with USD/JPY trading at 92.87, down 0.41% prior to the release. The USD also weakened against the Euro, falling to $1.3613.

Across the border, Canada posted its fifth straight trade surplus in February, the longest series of reported surpluses since November 2008, adding to yet piece of evidence supporting a growing economic recovery. Yesterday Canada’s balance of goods beat market expectations as Stats Canada reported a monthly trade surplus of C$1.40 billion ($1.39 billion), the largest surplus since October 2008. Despite a rising Canadian Dollar, exports increased 2.8% in February to C$34, led by a 7.2% gain in industrial goods and automatic products. Imports rose 0.9% to C$32.6 billion.

However, despite this positive news, the Loonie was little changed at C$1.0033 per U.S. dollar following the report.