US Dollar gains across all major instruments even though Retail Sales miss

General market theme
An impressive pickup in momentum and volatility over the past couple of days is the most important development in the money markets and equally important to note is the fact that behind this improvement in price action is renewed Dollar strength. However what should really make us wonder is how is it possible for the Dollar to keep gaining across the board since the beginning of the week when the most market-moving report which is the Retail Sales printed in the red.

Indeed traders were expecting a robust reading in the consumer spending report that would possible justify Fed’s bullish rate hiking agenda and earlier in the week the Dollar was picking up momentum as investors were loading their pro-Dollar positions. However the report missed its mark by a wide margin and actually showed contraction rather than growth but the Dollar still gained which hints us to think that the US currency might have reached a technical bottom and demand is higher due to that rather a strong report.

Price action highlights
The Euro declined yesterday morning on the back of a weaker Industrial Production report and then spent the rest of the day in the red as well even though the Retail Sales report missed its mark. The Single currency is trading around the 1.1250 this morning and further correction could be in the cards if the Dollar momentum continues. The release of the Eurozone inflation levels might take some pace off the decline if it prints in a positive manner this morning but the price action will mostly be dictated by the market’s appetite for US Dollars.

The Cable was also in the red proving that the Dollar rally took place across the board and the decline has led the rate below the 1.4200 support area and in close proximity of the 1.4100 level. This morning though the most important news event will be the release of the monetary policy statement after BoE’s meeting and rate decision. Last time the policymakers praised the progress of the domestic economy as it faced uncertain future with the fears of Brexit still in the foreground so it will be interesting to see where they will focus this time around.

Focus of the day
In the morning the release of Eurozone inflation levels will be the appetizer and later at noon the BoE’s Rate Decision and policy statement will attract our attention. Later in the day though the US inflation levels’ release is also important so we need to need to stay alert and expect further price action in all major instruments.

Economic Calendar