USD/IDR turns volatile after weak Indonesian Retail Sales, Fed Powell in focus

• USD/IDR has displayed a wild gyration after the release of downbeat Indonesian Retail Sales data.
• The annual Indonesian Retail Sales have dropped to 1.3% vs. the former release of 3.7%.
• Fed policymakers have not trimmed their terminal rate projections despite a slowdown in economic activities.

The USD/IDR pair is displaying volatile moves in the Asian session after the release of the annual Indonesian Retail Sales (Nov) data. The economic data has landed at 1.3%, lower than the prior release of 3.7%.

A decline in Retail sales is going to delight the Bank Indonesia (BO), which is focusing on taming inflation. Currently, the Indonesian Consumer Price Index (CPI) stands at 5.51%. A drop in retail demand is a critical factor that signifies a decline in the price pressures ahead.

Meanwhile, the risk profile is turning averse as S&P500 futures are facing immense heat from the market participants. A follow-up selling in the 500-stock basket futures after a late sell-off on Monday is indicating that investors are getting anxious ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. The alpha generated by 10-year US Treasury yields has accelerated above 3.54%, portraying caution in the market mood.

The US Dollar Index (DXY) has found an intermediate cushion above 102.50 as Fed policymakers have not trimmed their terminal rate projections despite a slowdown in the extent of economic activities in the United States economy and a significant drop in employment bills generated by firms.

San Francisco Fed Bank President Mary Daly cited that it is reasonable for interest rates to be at 5%-5.25%, as reported by Reuters. Also, Atlanta Federal Reserve bank president Raphael Bostic sees the interest rate peak in a 5%-5.25% range and the continuation of higher interest rates beyond CY2023.