All eyes last week were on dollar’s slide against all rival currencies, after the release of disappointing U.S. retail sales report for January and unexpected rise in initial jobless claims the week ended February 8.
Official data from the U.S. Commerce Department published on the economic calendar on Thursday, February 13th, showed a slide in retail sales for the second consecutive month in January. The report indicated that retail sales decreased by a seasonally adjusted 0.4% the previous month, upsetting expectations for a 0.3% rise and seriously questioning the outlook of the U.S. economic recovery. December’s figure was revised down to 0.1% decline from a previously reported 0.2% gain, when winter clothing sales rose. Strong retail sales associate with robust economic growth, while decreasing retail sales show a declining economy, thus directly affecting the market sentiment in a negative way.
The report also indicated that core retail sales, excluding automobile sales, were flat in January, compared to expectations for a 0.1% increase. The corresponding figure in December was revised down to a rise of 0.3% from a formerly documented upsurge of 0.7%. Core sales reflect on the consumer spending element of the U.S. Gross Domestic Product. It is noteworthy that consumer spending accounts for 70% of the overall economic growth.
The median estimate of 86 economists surveyed by Bloomberg News before the release of the official data in Thursday, showed stagnation in U.S. retail sales in January. In anticipation of the report, TeleTrade analysts said that “a probable decline or flat outcome on retail sales report, will provide little motivation for traders to buy the greenback, where this in the short-term will imply little prospective for the currency’s recovery”.
Meanwhile, official data from the U.S. Department of Labor showed that the number of individuals who filed for unemployment assistance in the week ending February 8, increased to 339,000 from the previous week’s figure of 331,000. Economists had anticipated jobless claims to drop by 1,000 to 330,000, so the announced figure came as a shock. The unexpected 8,000 weekly increase fuelled traders’ concerns over the strength of the U.S. labor market.
Euro gained ground
Following the release of the weak data on Thursday, 13, the single currency rose versus the U.S. dollar, with EUR/USD climbing up to 0.65% to 1.3681, rebounding from the previous session’s lows of 1.3561, after the statements of Benoit Coere - ECB member - that the ECB is seriously considering a negative overnight interest rate on deposits.
In Friday 14, however, the single currency peaked to an almost three-week high against the greenback, with EUR/USD gaining 0.08% to 1.3691. The euro found further support after the release of preliminary data reporting rise in Eurozone’s Gross Domestic Product by 0.4 in the last quarter. The report that was published by Eurostat, exceeded forecasts for a 0.2% increase, following a merely 0.1% rise in Q3. Eurostat’s data also indicated that the seasonally-adjusted GDP growth in the Eurozone area was projected to be 0.5% up compared to the last quarter of 2012.
Another report earlier in the day, indicated that the German GDP increased by 0.4% in Q4, above forecasts for a 0.3% increase, while the French GDP rose 0.3% during the same period, with regard to forecasts for a 0.2% rise.
GBP in 33-month high
The sterling edged up to a 33-month high versus the U.S. dollar on Friday, with GBP/USD increasing to 1.6715 during European morning session. The cable strengthened significantly after the Bank of England revised its forecast for the U.K. economy from 2.8% to 3.4% for the current year on Wednesday, 12. The BoE also updated its forward guidance on bank rates, stating it will not increase rates until the spare capacity in the U.K. economy has been fully absorbed, which it is not expected to occur until 2015.
Performance of Other Major Currencies
In the wake of the unexpectedly weak data on Thursday, the USD/JPY hit 101.71, the lowest since February 7. The greenback remained lower on the following day, with USD/JPY reaching 101.85. The yen generally found support against its rival counterparts at the end of the week, as decreases in Asian equities enhanced demand for Japan’s safe currency.
On Friday 14, the U.S. dollar also edged lower versus the Australian and New Zealand dollar, with AUD/USD rising 0.51% to 0.8924 and NZD/USD gaining 0.32% to 0.8368, after the announcement of positive inflation figures from China, as the country is the main trading partner of both Australia and New Zealand. The greenback lowered against the Swiss franc and the Canadian dollar, with USD/CHF falling 0.11% to 0.8926 and USD/CAD dropping 0.20% to 1.0953.
Among weak retail sales and employment numbers, the U.S. dollar index, which records the overall performance of the currency against a basket of six other major currencies, fell 0.18% to 80.21 on Friday, which is the lowest in more than a month.
About TeleTrade – Financial Markets Expert
Founded in 1994, TeleTrade is a truly global brand with over 200 offices in 30 countries, being an acknowledged leader in its field with numerous industry and business awards. TeleTrade-DJ International Consulting Ltd is established in Cyprus and maintains representative offices in most EU countries. It is licensed and regulated by CySec (Cyprus Securities and Exchange Commission) under licence number 158/11 and operates in accordance with MiFID (EU Investment Directive).
Dear TeleTrade clients, Please be informed that due to severe weather conditions in Hong Kong, pricing (and execution of orders) on CFDs on CHN_H50 and HK50 indices is temporarily suspended by the providers. Trading...
Dear TeleTrade clients, Please note there will be changes to the trading schedule of CFD instruments on Thursday, October 14th, 2021, due to the celebration of the Double Ninth Festival in Hong...
Dear TeleTrade clients, Please note there will be changes to the trading schedule of CFD instruments on Monday, October 11th, 2021, due to the celebration of Thanksgiving Day in Canada. Changes to...
Dear TeleTrade clients, Please note there will be changes to the trading schedule of CFD instruments on Friday, October 1st, 2021, due to the celebration of the National Day in China. Changes...
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2021 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.