Shaky US retail sales impactsprospects of 2015 rate hike

Global Markets

Friday’s soft US sales report may have eroded some hopes that the Fed would hike US rates in December, and as a result the USD momentarily depreciated across the global currency markets before regaining momentum. Both the core retail and retail sales failed to meet expectations which may have unearthed concerns about a potential economic slowdown in the US economy. This retail sales report has also dealt a blow to investor sentiment, as a decline in consumption signals a potential slowdown in GDP growth. Today’s shaky data from the US has offered a strong reason for the Fed to remain on standby and with speculations of a 2015 US rate hike trimmed, the Dollar may show some weakness in the near future.

Whilst the Dollar momentarily depreciated, Gold instantaneously inclined and printed new daily highs of 1088.47 before crashing back down. Even though the reduced expectations that the Fed may raise US rates in December could offer Gold bulls a welcome boost, this commodity is still heavily bearish. The direction of Gold continues to be dictated by US rate expectations and today may have offered buyers a chance to make the most of the 1080 support. Technically if prices attain a solid daily close below this support, then prices may decline to the next relevant level at 1050.

Next week the focus will likely be directed towards Mario Draghi’s scheduled speech in Madrid where he may repeat his comments about the ECB implementing additional stimulus measures to the Eurozone if needed. With expectations mounting that the European Central Bank may take action in the near future, this obvious contrast in monetary sentiment between the US and Europe may continue to encourage selling momentum in the EURUSD.