Traders are keeping quiet ahead of the US Retail Sales report tomorrow

Another relatively quiet trading session yesterday during a week that we have mentioned that volatility and participation in the markets will be reduced compared to the strong moves we saw last week. The most important event of this trading week will come tomorrow with the US Retail Sales that will either confirm Dollar’s recent strength or cast doubts on a December rate hike.

Yesterday the most market moving event was the release of the UK employment data that traders were eager to receive as the Pound is also in focus. The release was expected to print in a bullish manner confirming the positive pace of progress in the UK economy and indeed it showed good progress in all fronts, even though the Average Weekly Earnings component printed strong but lower than expected.

The UK economy is doing well, we’ve seen that in various reports and market metrics in recent weeks and if it wasn’t for Dollar recent surge in strength the Pound would have been trading higher. It is BoE’s dovishness regarding the inflation levels that has hurt the Cable’s outlook but even like that the UK currency has seen a good reaction during the past few days.

Building on its recent correction and supported by the bullish employment report yesterday the Cable has extended its rally to the upside and has traded up to the 1.5250 level. This constitutes a 200+ pips correction from the 1.5030 lows of last week showing that there is strength in the Pound as traders realize that other than the Dollar the Pound is the more robust currency of the FX majors’ universe at this time. The question now becomes whether the Pound can sustain these levels ahead of tomorrow’s US Retail Sales report.

Contrary to the Cable the Euro didn’t enjoy any rallies to the upside during this week but has been trading within a sideways formation between the 1.0670 and 1.0770 levels. The Euro has lost a lot of ground recently and it’s natural for the decline to ease at some point and consolidation to take its place. The bias remains bearish but for more losses to occur the recent lows need to be broken and that might take some effort from the Dollar tomorrow.

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