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It’s a dog-eat-dollar world

It’s a dog-eat-dollar world

GBP
The Pound is gaining against a broadly weaker US Dollar with investors feeling more upbeat overall, focusing on the prospect for UK rate hikes given the continued above-target rate of inflation. Continuing to benefit from the Greenback’s negative wave, coupled with the market’s ability to shake off Brexit baggage from barbs being thrown across the Channel between UK and European Union leaders, Sterling has seen a rise in the last week.

The UK retail sales data out today is expected to rebound by 0.5% m/m in January, while on an annualized basis, retail sales are seen ticking higher by 2.6%. In December, retail sales dropped sharply by 1.5% over the month and 1.4% annually. Meanwhile, core retail sales data, excluding fuel, are expected to come in at 0.6% m/m and 2.5% y/y. The report will be published later this session at 09:30 GMT.

While Retail Sales are not a top-tier data release, numbers posting in the green will pair nicely with the Bank of England’s (BoE) recent hinting at interest rate increases coming sooner rather than later if economic growth keeps up. Positive economic data for the Pound will only further reinforce the approaching interest rate increases coming from the BoE, with some analysts anticipating the first increase to come as soon as May.

USD

The New York Empire State manufacturing index fell to 13.1 whilst the Philadelphia Fed index rose to 25.8 for February. Further, US PPI rose 0.4% m/m, increasing 2.5% y/y in January with US industrial production dropping to -0.1% m/m in January.

The US Dollar has slid close to its recent lows following a continued sell-off despite stronger US inflation that has raised expectations for rate hikes this year. The popular trade of selling the Dollar that kicked off the year appears to be back in fashion, with growing trade and budget deficits seen as a major fundamental headwind for the Dollar.

Cable saw a gradual rise throughout yesterday as levels closed at 1.4132. A similar fashion was seen against the Euro but in a more aggressive manner as levels closed in the mid-1.25s. Since the beginning of the week, the Dollar has weakened by 2.25%.

EUR

It was a relatively empty economic calendar for the Euro yesterday but the single currency reached its highest level since December 2014 against the Dollar. Amid the Dollar sell-off, firm Eurozone data this week, and the trade balance beating expectations yesterday with a strong surplus of €23.8billion in December, levels have now passed the 1.25 mark.

Sans any major market moving data out today for the Euro, the US economic Dockit will attract the attention of the Euro market for short-term impetus.

Data to Watch:

07:00 EUR Wholesale Price Index (MoM) (Jan)
07:00 EUR Wholesale Price Index (YoY) (Jan)
08:20 EUR ECB Cœuré Speech
09:30 GBP Retail Sales (YoY) (Jan)
09:30 GBP Retail Sales (MoM) (Jan)
09:30 GBP Retail Sales ex-Fuel (MoM) (Jan)
09:30 GBP Retail Sales ex-Fuel (YoY) (Jan)
13:30 USD Housing Starts (MoM) (Jan)
13:30 USD Building Permits (MoM) (Jan)
13:30 USD Building Permits Change (Jan)
13:30 USD Housing Starts Change (Jan)
13:30 USD Baker Hughes US Oil Rig Count

 

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