RationalFX: Retail sales in the US come out better than expected [15/12/2010]

RationalFX: Retail sales in the US come out better than expected [15/12/2010]
Since the Fed announced QE2 there has been a trend of selling off the dollar, this was initially suspended by the problems in the Ireland and it has now definitely halted with all eyes firmly on the Eurozone as the problem area. Moody is now reviewing Spain’s debt rating and could be downgraded. The shared currency slumped early today as it became clear Spain would need to raise €170bn in 2011. As we look towards the New Year it seems to be increasingly more apparent that the Euro will have a tough 2011 especially with Germany now getting fed up with footing the bill.

Yesterday’s Market Movers

  • In the UK yesterday CPI was released, this is a measure of inflation. This was expected to remain the same both YoY and MoM but both increased 0.1%. These figures saw GBP/EUR strengthen slightly as it shows that we are still spending. Even though we are still well above the key 2% level this is not too bad as it is still widely expected, and reiterated by the BOE,  to come down naturally by mid 2011.
  • The Retail Price Index in the UK was also expected to come out flat both MoM and YoY in the UK yesterday. Again speculation didn’t prevail with both figures coming out better than expected with MoM increasing to 0.4% from 0.2% and YoY coming out at 4.7% from a previous figure of 4.5%.
  • In the Euro zone yesterday we saw the release of the Industrial Production figures which were expected to come in better than previous, showing potential to strengthen the Euro. This went the other way and came out worse with MoM figures dropping by over half a percent and YoY doing the same.
  • The ZEW survey came out in better than expected in Germany yesterday and although a muted response at first we did see a brief trend of euro strength later in the day.
  • It was a busy day in the US yesterday;  PPI which was expected to come in slightly better than previous figure came out as expected at 0.8%
  • Retail sales in the US yesterday were expected to come out worse MoM however it came out better than expected rising 0.2% but still a fraction off of last month’s figure even though ‘Black Friday’ was the biggest on record. Although this still came in worse than last month this still gave support to the USD which rose against 16 counterparts yesterday.
  • The Federal Interest Rate decision was a very important release of data yesterday, the expectation was to stay the same as previous at 0.25% and it remained the same.

Today’s Market Movers

  • A busy day in the UK today sees ILO Unemployment Rate with an expected figure of 7.7% from the same previous figure. A better figure could be seen as bearish on sterling as people will be spending less due to lack of jobs.
  • Also in the UK we have the Claimant Count which is the statistics of how many people are unemployed within the country. This is expected to stay the same as the previous figure of 4.5%; a higher figure released would be seen as negative and a lower figure bullish.
  • UK jobless claims are out 9.30 with an expected figure of -3.0K from a previous -3.7K. With a lower figure than expected seen as positive as it shows less people are unemployed with the UK itself; a higher reading will be judged as negative for the economy.
  • In the Eurozone today the only relevant data out is the ‘Employment Change’ across the board QoQ with an expected figure 0.2% from a previous 0% flat.
  • Angela Merkel today will lay out Germany’s position to increasing the emergency fund in an 11am meeting with Parliament. Germany has already stiffened its position and if this is riterated we will see further Euro weakness on a day when Spain is in the spotlight as well.
  • In the US today we have a lot of data released including the CPI with an expected figure of 0.2% MoM to remain the same and year on year to decrease 0.1% to a figure of 1.1%.
  • The final piece of data worth noting in the US is the Industrial Production released at 14.15 with a figure expected at 0.3% from a previous figure of 0% flat.
Currencies
High
Low
Support
Resistance
GBP/EUR
1.1868
1.1758 
1.1764
1.1904
GBP/USD
1.5911
1.5737
1.5700
1.5900
EUR/USD
1.3498
1.3362
1.3300
1.3500
We wish you a very nice day.

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