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Retail Sales Boost Dollar

Greenback Sees 6-Week Highs on Sales and Speculation

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The greenback posted a strong reversal after previously falling to a 15-month low two weeks ago. Retail sales numbers saw one of its strongest gains, as hedge funds and money managers trimmed their bearish bets on the dollar. Inflation data and FOMC minutes will be the key risks for the dollar this week.

German GDP Accelerates in Q1

Economic growth in Germany accelerated in the first quarter with domestic consumption and construction activity leading the way. GDP grew at a quarterly rate of 0.70%, data from the Federal Statistical Office showed on Friday. Annually, German GDP was at 2.70%, more than the 0.30% recorded in the fourth quarter of 2015. The data beat analyst expectations of a 0.60% gain. Despite being one of the best national GDPs this quarter, economists expect German growth to moderate from its current pace by the end of Q2 due to slowing investment. In a separate report, German inflation remained subdued, falling 0.40% on a month over month basis in April.

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Kuroda Hints at Further Easing

Speaking at the Parliament in Tokyo on Friday, the Bank of Japan Governor said that the central bank can ease its monetary policy further if needed, in order to achieve the 2.00% inflation target. He said that there were ample options to expand the central bank's policy stimulus. For the most of last week, Japanese officials came down strongly on the yen's appreciation from the week before with finance minister Aso being the most verbal, in line with the US Treasury's currency report which named Japan as one of the countries actively engaged in weakening their currency. The BoJ will be meeting in June.

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US Retail Sales Boosted

Retail sales in the US edged higher in April, rising 1.30% from the prior month, posting the biggest monthly gain since March 2015, data from the Commerce Department showed on Friday. The 1.30% increase beat analysts’ expectations of a 0.80% increase from the previous month. Sales surged in autos, gasoline and non-store retail sectors including online retailers. Compared to a year ago, retail sales grew a strong 3.0%. In a simultaneous report, US producer prices rose 0.20% in April following a 0.10% decline in March. Excluding food and energy prices, PPI increased 0.10% for the month.

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Industry and Retail Combined Disappointment in China

Economic data from China released on Saturday painted a dismal picture for industrial production, retail sales and investment. Industrial production increased 6.00% in April, falling short of expectations of 6.50%, data from China's National Bureau of Statistics (NBS) showed on Saturday. April's slow pace of growth was lower than March's 6.80% increase. Retail sales were also slower than expected, rising to 10.10% below estimates of 10.50%, which was also the same pace of growth seen during the prior month.

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