Yesterday’s decline in the value of the USD was sudden and sharp. The euro and the pound rallied into the New York close and continued their gains early this morning in the Asian session. The moves higher by the European currencies are surprising given the lack of market moving events yesterday. Traders will now look to economic data from both the UK and the US for market direction.
Today’s Economic Data Releases:
GBP – CPI y/y – 08:30 GMT
Expectations: 4.5%. Previous: 4.5%.
UK inflationary forces are expected to remain at higher levels as the BoE delays any potential interest rate hike so as not to derail the tepid UK economic recovery. Yesterday BoE MPC member Martin Weale put forward his case for an increase in UK rates citing the BoE has strayed from its inflation mandate. The inflationary numbers may indeed come in higher and support the pound in the short term but the BoE appears firm in its inaction. Cable has resistance at last week’s high at 1.6470 and the May 31st high at 1.6550. Support is located at the rising trend line from the May 2010 low at 1.6190.
USD – Retail Sales m/m – 12:30 GMT
Expectations: -0.3%. Previous: 0.5%.
In keeping with the trend of disappointing US economic data expectations are not high for today’s retail sales report. Traders should also be eyeing the core retail sales report that does not take into account gasoline, autos and building materials. The dollar could continue to decline on further negative US economic pessimism. EUR/USD resistance looks to be at 1.4550 at the 61% retracement of last week’s declines. Support is found at the overnight lows from Sunday at 1.4320.
USD – PPI m/m – 12:30 GMT
Expectations: 0.1%. Previous: 0.8%.
Regardless of a potential uptick in PPI numbers the Fed’s monetary policy has been well communicated with the market and the Fed is not expected to adjust interest rates higher in the near term.
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