The dollar fell to a three-year low against the euro and yen on Tuesday, as investors brace for data later in the week that is expected to show the U.S. economy expanding at a stronger pace than previously anticipated.
The “foreign exchange market” has been weak for a while. The weakness is continuing ahead of key data that will be released this week.
- Euro and pound both rise against the USD
- Focus on December’s Retail Sales
- Continued Unrest on Wall Street
For the third day in a row, the US Dollar’s performance on the currency market has remained dismal as the Dollar Index fell even more. Both the Euro and the Pound have benefited from this, moving higher earlier in the week as a result of the two currencies gaining momentum. This occurs before the publication of December retail sales, another significant day on the economic calendar. On Wall Street, meanwhile, equities are attempting to recover from yet another difficult day of selling in order to close the week on a more encouraging note.
Both the pound and the euro benefit from a weaker dollar.
During the early trading hours on Thursday and Friday, euro-forex trading was once again in the black. Those who are positive on the pair believe it might test 1.15 before the end of the week. The pair finished the previous day close to 1.145. Although the common currency has mostly profited from Dollar weakness rather than any of its own positive, ECB President Christine Lagarde is also scheduled to speak.
Sterling has seen a similar situation as the GBP/USD rate rose over 1.37. However, there was more positive news coming out of Britain, as November GDP data revealed a 0.9 percent monthly gain. This was far better than the 0.4 percent economists had predicted, and it might help the pound gain further momentum.
Traders Are Watching Retail Sales Data
The publication of December’s retail sales statistics is eagerly anticipated by both forex brokers and traders in the US. Despite the expectation for basically unchanged numbers, the Dollar will be impacted by any deviation. The Dollar may get some support from an upward beat as it attempts to end a three-day losing streak.
The Fed and Treasury yield rates in particular will get more attention. On Thursday, the US 10-year yield decreased by about 2%, which put pressure on the US dollar. If this area were to improve, the anticipation for an interest rate increase in March would rise to extremely high levels, perhaps exceeding 80%, which would help the Dollar hold off its competitors.
Focus on Bank Earnings on Wall Street
The key figures for the day on Wall Street will come from both US retail sales and the big banks’ earnings reports that are released before to the opening bell. Traders will attempt to recover some of the losses from Thursday so they can start the busy day of numbers and the weekend on a more positive note.
All the major indices sold off to close lower yesterday. The Dow Jones was the least of the casualties with a drop of just under 0.5%. The S&P 500 dipped 1.4% falling back sharply toward the end of the day, and the tech-heavy NASDAQ took a beating with a more than 2.5% loss on the day. Equities traders will be hoping for a better end to the week.
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