In a sure sign of the pressure to sell the EURUSD pair, the Retail Sales report last Friday, which came in below expectations, nevertheless was followed by dollar buying. This was after a knee-jerk reaction which saw the pair rise – for about ten minutes - before turning around and resuming its downward trajectory. This is only the latest indication that the market is in the course of pricing in a rate rise by the Federal Reserve in December.
The U.S. Retail Sales report invariably moves the market, and this is with good reason. Retail is a sizeable component in the calculation of U.S. GDP, and this is one of the major determinants of Federal Reserve decision making when it comes to possible rate rises.
The price movement at present indicates strongly that the Forex market, at least, has come to believe the Fed rhetoric that points to a December rate rise.
HICP report today and Draghi speaks in Madrid
Today sees the release of the final harmonised Index of Consumer Prices (HICP) for the Eurozone as a whole, which will be watched by the ECB as it contemplates its next move on monetary policy, while the President of the ECB, Mario Draghi, is due to speak in Madrid (see above). This is not a mainstream monetary event, and Mr. Draghi has been speaking a lot in public recently, but he may say something that could cause a stir. As usual, his words will be closely monitored.