Alpesh Patel's NEWSLETTERPRO - US Retail Sales to disappoint Dollar traders today while Pound headed higher after the Inflation Report

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© Alpesh Patel

As expected the Pound was the key theme of yesterday’s session as the Bank of England released its Inflation Report. The report contained significant changes in what we knew so far and as such the volatility in the British currency was substantial.

In their Inflation Report the Bank of England decided to drop their unemployment threshold to raising interest rates altogether and this signals a change in their policy. Unemployment was falling faster than anticipated and was near BoE’s target but the economy is still too fragile to handle increased interest rates.

At the same time however, the Bank of England updated their growth forecasts, making word for more than 3% growth this year which is a significant upgrade. The Pound received  the news with increased volatility as it made its way towards 1.6620. Now at that levels important resistances can be found so we could see a retracement today that will allow us to join the trend upwards.

The Euro on the other hand was quite weak over yesterday’s session, the European currency gave up some of its recent gains trading down to 1.3560 as Industrial Production for the Euro area disappointed. The figures came in even lower than expected and that along with the demand for Pounds on the EUR/GBP cross led the currency lower. The Euro pulled back higher over the late American and Asian session and is now trading around the same levels as yesterday but the former uptrend has been concluded and we expect further losses for the currency at this time.

The Dollar was not that consistent in its performance yesterday as it gained ground against the Euro but it was lower against the Pound. There were no Dollar-related news yesterday hence Dollar’s inconsistency but today we have 2 important events: Yellen’s speech to the Senate and the Retails Sales release. We don’t expect anything new from Yellen’s speech as we believe she will repeat the same views that she shared with the House’s committee on Tuesday.

However, the Retail Sales report could be significant as expectations are set low for the figures. Analysts expect Retail Sales to remain unchanged for the past month which is not encouraging for the Dollar but with job growth still week we see room for a surprise even lower.

Advance Retail Sales and Initial Jobless Claims

As the title above suggests, the main events for today will be the two releases from the US, along with Janet Yellen’s speech to the Senate. We don’t expect anything new coming out from Yellen’s speech as she will most likely repeat what she said on Tuesday to the House committee but the Retail Sales and Jobless Claims reports will provide us with new data.

Especially the first one could put Dollar under pressure as figures are expected to remain unchanged for the past month and we believe that there’s potential for even a decline which will send the US currency lower. The Initial Jobless Claims are expected to remain at the same levels but we already know that the job market in the US is currently stagnating so now surprises here.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

7.00

EUR

German Consumer Price Index

Medium

1.3%

1.3%

13.30

USD

Advance Retail Sales

High

0.0%

0.2%

13.30

USD

Initial Jobless Claims

Medium

330K

331K

15.30

USD

Fed’s Yellen speaking to the Senate

Medium

 

 

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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