Daily FX Trading Update: Strong US Retail Sales and PPI

The US dollar regained ground against its peers on Friday when retail sales and PPI reports came in the green. Headline retail sales increased 0.6% as expected while core retail sales posted a 0.5% gain versus the projected 0.4% increase. Headline PPI was up 0.3% versus the projected 0.2% increase while core PPI posted a 0.2% uptick versus the projected 0.1% rise. However, preliminary consumer sentiment was weaker than expected at 89.2 versus 92.1. US industrial production data and the Empire State manufacturing index are lined up today.
The euro continued to slump across the board even though trade data came in better than expected. The surplus widened from an upgraded 20.8 billion EUR to 23.3 billion EUR in the region, reflecting stronger demand. Euro zone final CPI readings and a speech by ECB head Draghi are lined up today, possibly setting the tone for the ECB decision later this week.
The pound made a bit of a recovery against its rivals as some traders stayed hopeful that the UK parliament hearings could lead to a soft Brexit or a delay in triggering Article 50. In his testimony, BOE Governor Carney shrugged off the massive weakness in the pound since this has been supporting economic activity. There are no major reports due from the UK today so traders could price in expectations for the top-tier releases later in the week or react to any updates from the UK government.
The franc weakened to the dollar but chalked up more gains against the euro and the pound, acting as the safe-haven in the European region. Swiss PPI posted a stronger than expected 0.3% gain in producer prices versus the projected 0.1% uptick. There are no reports due from the Swiss economy today.
The yen recouped some of its losses towards the end of the week as traders booked profits off their recent trades. Yen pairs gapped up over the weekend but these gaps were quickly filled in the past few hours. Japan’s revised industrial production report is due next.
Commodity Currencies (AUD, NZD, CAD)
The comdolls advanced across the board led by upbeat Chinese inflation readings in Friday’s Asian session. There are no major reports from the comdoll economies today but RBA head Lowe has a testimony lined up in the next Asian session while New Zealand will print its quarterly CPI report. Analysts are expecting to see a flat reading for Q3 and a weaker than expected read could underscore McDermott’s remarks on slow inflation for the period, reinforcing RBNZ rate cut expectations.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.