General market theme
In our previous report we mentioned how traders were not convinced by the recent Fed comments on the interest rate policy and were skeptical in buying dollars against the rest of the major currencies. We were looking towards the Fed minutes’ release to clarify the central bank’s views, but the release was even more mixed itself.
It showed that policymakers didn’t have a consensus on when it’s appropriate to take the next step and raise rates further, which unfortunately adds to the uncertainty surrounding the US currency. Today the focus will be on European and UK reports, with the UK Retail Sales being eagerly anticipated from market participants to gauge the strength of the domestic consumer market.
Price action highlights
The euro traded sideways most of the day yesterday and remained confined between the 1.1250 and 1.1300 levels, waiting for the Fed minutes’ release. When the release finally hit the wires the reaction was a large spike both to the upside and the downside, but eventually the euro settled within the same range.
Overnight, the single currency has edged above the 1.1300 level, and it now remains to be seen whether it can sustain these gains against the weak dollar or not.
The cable traded in a similar manner over the past 24 hours, staying within the 1.3000 and 1.3100 levels while traders are assessing the contents of the Fed minutes’ release. Today the UK Retail Sales will take centre-stage and affect the pound, and we’re very keen on finding out whether the Brexit decision has taken a toll on the consumer market.
A break out of this sideways pattern will show us what’s next for the UK currency while its outlook also remains mixed.
Focus of the day
Early in the morning the release of the UK Retail Sales figures will start the day, and as we mentioned above it will be very interesting to see how the pound will react to these numbers. Half an hour later the Eurozone inflation report will follow, and it can also take a toll on the euro as it remains fragile above the 1.1300 level, while later in the afternoon the US Initial Jobless Claims report should have a limited impact on the US dollar.
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