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U.S retail sales weakened by 1.1% Y/Y yesterday which sent U.S stock markets lower. While a recovery in the U.S economy could be too early to call,
some say the Stock markets will be ahead of the curve on this as economic data is backward looking. While many analysts are calling EURUSD long and a return of risk appetite we see a return of risk averse trades pushing the Yen and dollar higher. Volatility has made a comeback as we settle into broad ranges which we will only break out of once we have a firm grip on the direction of the global economy.
Focus now is on how currencies will price the earnings and economic data to come, however sentiment will be a very big factor to this – the dollar remains a firm choice for a haven but waning demand and strong risk appetite could reverse this momentum. In terms of the EURUSD we don’t see a turn around in the broad bear trend before we re-test 1.2600 – 1.2500 levels (historic fair-value). We have highlighted this on our graph.
Ahead today, CPI for march is due at 12:30 GMT and the market expects an increase of 0.1% compared with 0.4% in February. Other releases include the TIC report for February, the NAHB housing market index for April and the Fed’s Beige Book.
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