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.
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