General market theme
The focus was on the pound and the dollar over the past 24 hours, with the BoE meeting on monetary policy and the release of the US Retail Sales figures being the most important events of the day.
We have to say that investors shouldn’t be impressed with the performance and the reaction of the major currencies to these events: the pound was in the red as the BoE meeting didn’t offer anything fresh, while the dollar remained in demand even though the Retail Sales report printed even worse than expected.
It seems that investors are keeping their cards closed at this time, not entering into any serious repositioning and waiting for further confirmation before taking any action.
Price action highlights
The euro has fallen victim of this lack of action and remained confined within its recent trading range for yet another day. The miss in the US Retail Sales report did hike the single currency higher for a brief period of time, but the lack of follow-through was disappointing. The euro remains trading between the 1.1225 and 1.1270 area and it will take something significant to force it to pick a direction.
The cable took another U-turn yesterday and declined lower when the BoE meeting didn’t provide any reason for investors to be excited or otherwise. The pound failed to capitalize on the weaker Retail Sales reading from the US as market participants didn’t seem willing to dump the US currency on the back of the report.
While the pound remains under pressure and fails to move to the upside, another push lower to test its recent 1.3130 lows seems in the cards.
Focus of the day
The day ahead of us only holds a couple of important events to keep an eye on: the release of the US inflation figures and the University of Michigan confidence levels. It will be interesting to see whether the unwillingness to dump the dollar over yesterday’s bearish US Retail Sales report is based on the assumption that figures today will print in favor of the dollar.
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