European FX Outlook: The Christmas sales in the UK are set to disappoint

What you need to know before markets open:

• The US Dollar came under pressure as the pressure on the US Senate increased after House approved short-term spending bill in an attempt to avert the government shutdown that would begin today onwards.
• The UK retail sales are expected to fall on a monthly basis in December due to strong previous month. Retail sales are seen accelerating growth rate when compared to a year ago.

Friday’s market moving events

• German PPI is set to decelerate to 2.3% y/y in December.
• The Eurozone current account is set to reach a surplus of €31.2 billion in November.
• The UK retail sales are expected to fall 0.6% m/m in December while core retail sales are seen falling 0.8% at the same time.
• Canada’s manufacturing sales are seen rising 2.0% m/m in November
• Michigan consumer confidence is set to increase to 97.0 in January.
• The Federal Reserve Federal Reserve Vice Chairman for Supervision Randal Quarles is scheduled to speak on bank regulation at the "American Bar Association - Banking Law Committee Annual Meeting" in Washington at 18:00 GMT 
• San Francisco Federal Reserve President John Williams is set to speaks at the Bay Area Council Economic Institute 11th Annual Forecast Conference: "Visualizing the Future of the Bay" in San Francisco at 18:30 GMT

Major forex market movers

• The fear factor has been playing a dominant role in FX market on Thursday with uncertainty about the US government shutdown weighing on the US Dollar.
• Sterling was the top performer against the US Dollar with GBP/USD easily breaking previous resistance at $1.3850 that opens the way for a new target of $1.4000.
• As the UK retail sales report headlines the calendar on Friday, the spotlight will be on GBP/USD in Europe.

Thursday’s macro summary

• Australian employment rose 34.79K new jobs with the unemployment rate ticking up to 5.5% in December.
• China’s retail sales decelerated to 9.4% y/y in December.
• China’s industrial production rose 6.2% y/y in December.
• China’s Q4 GDP is expected 6.8% y/y, matching the previous quarter.
• German Bundesbank President Jens Weidmann is expected to speak at a joint conference by the International Monetary Fund and the Deutsche Bundesbank, in Frankfurt at 8:00 GMT.
• The US housing starts decelerated more than expected to 1.192 million in December.
• The US building permits rose to 1.3 million in December.
• The US weekly jobless claims fell unexpectedly to 220K in a week ending January 12 indicating a revival of the US labor market in January.
• Philadelphia Fed manufacturing index fell to 22.2 in January, down from revised 27.9 in December.
• Cleveland Federal Reserve President Loretta Mester said that further rate hikes in 2018, 2019  are “appropriate”.
• EIA crude oil inventories are expected to fall by 6.9 million barrels in a week ending January 12.