US Retail Sales in Focus
On the back of a weaker-than-forecast US CPI print for October, the US Dollar has come under heavy selling pressure. The data, and subsequent comments from Fed vice chair Brainard, have added weight to the market view that the Fed will slow the pace of its rate hikes in December, opting for .5% or less. With that in mind, today’s US retail sales will be closely watched with the potential for them to push USD down further if we see weakness.
One of the key arguments for the Fed to slow the pace of tightening is the impact higher rates are having on the economy. With the US grappling with a recession, higher rates are adding extra pressure and any signs of this impact coming through are taken as evidence for the need to scale back tightening. As such, should today’s retail sales come in below forecasts, the current USD sell off is likely to gather pace.
The breakout in EURUSD has seen the market reversing quickly higher, reflecting the extent to which EUR short positions had built up. The break above the bearish trend line and the 1.0364 level has seen the rally extending to a test of the 1.0417 level. With the retail market heavily short and with momentum studies bullish, the focus is on a continuation higher towards the 1.0775 level next.