Alpesh Patel's NEWSLETTERPRO - Euro area GDP data could send Euro above 1.37 as Dollar struggles with poor retail figures

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© Alpesh Patel

The US Dollar was under pressure across the board yesterday as we suggested in our previous report as investors were expecting a soft US Retail Sales report. Indeed, Retail Sales in the US didn’t just stagnate as analysts were expecting but the figures actually fell pushing Dollar downwards.

The 0.4% decline in January is an important setback for the consumer market in the US and taking into consideration the downwards revision of December’s figures as well we can confirm the slowdown in recovery in the US during the end of last year as both the consumer and the jobs sector have disappointed the previous months. Now, many analysts are blaming the bad weather for this decline on the Retail Sales figures but again with job growth stagnating the explanation is much simpler and more fundamental, less people have jobs so less people go out and spend money on goods.

The Euro benefited from Dollar’s weakness and rose to 1.3700 and is now hovering around the 1.3680 area. This is the third attempt for the Euro to break above the 1.3700 barrier for this year and it seems that it might have more luck this time around than in the previous two attempts. With the European and German GDP numbers expected to print strong today Euro might actually make it above 1.3700 and we will need to wait until next week to see if it can hold these levels.

The Pound continued strong yesterday and printed new yearly highs on the back of the weak Dollar performance. There were no UK-related news yesterday but with the Bank of England raising its growth forecast on Wednesday and the Dollar on the decline the British currency found the chance to climb further. Now if the Pound can hold on to these levels the next resistance comes at 1.6750.

The FTSE 100 had a bad day yesterday and gave up some of its recent gains after having reached the 6,700 points level but in late hours trading pulled back to close around the opening price. In our view however the recent uptrend has been concluded and further losses below 6,600 could be expected.

European GDP figures and US Production data

In our Economic Calendar for the day ahead, we have some important economic news scheduled for release today. Early in the day the German and the Euro-zone’s Gross Domestic Product figures are expected to rise and this could offer the Euro the opportunity to break above the 1.3700 barrier.

Later in the day, the latest Industrial and Manufacturing Production data are expected to show a mild slowdown in the month of January and this combined with yesterday’s soft Retail Sales data can put the pressure back on the Dollar and lift the high-beta currencies like the Euro and the Pound.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

7.00

EUR

German GDP

High

1.3%

0.6%

10.00

EUR

Euro-zone GDP

High

0.4%

-0.4%

14.15

USD

Industrial Production

Medium

0.2%

0.3%

14.15

USD

Manufacturing Production

Medium

0.1%

0.4%

14.55

USD

U.of Michigan Confidence

High

80.2

81.2

 

 

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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