Home Daily Commentaries US Dollar falls amidst weaker than expected retail sales data

US Dollar falls amidst weaker than expected retail sales data

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Wednesday 19 June, 2024

Daily Currency Update

In Europe, Bund yields narrowed vs other major European countries yesterday as policymakers said that political unrest in France will not spread to other European countries. We also saw the release of the German ZEW survey for June which showed a smaller than forecasted increase in investor expectations, this allowed the euro to appreciate slightly through Monday’s session.

The latest opinion polls in the UK show Labour's substantial lead holding up while Prime Minister Sunak’s party is languishing at 20%. This is close to the lowest level of support the Conservative party has ever held. Markets also noted that the pace of wage inflation is rising fast, which is slowing overall inflation, moving back to the BoE’s 2% target rate.

In the US, Federal Reserve officials have all stated that they need to see more consistent softer inflation data before they can consider voting to reduce borrowing costs. Fed chair, Jerome Powell, said that the timing of any cut will be strictly data dependent. The US dollar continues to trade firmly as markets await more economic data.

 

Key Movers

French elections due at the end of June remain a risk for the European single currency. Equities are under pressure and although bond yields have narrowed slightly they are still at levels not seen since 2017.  All this creates political uncertainty in Europe and is weighing on the single currency, which is likely to continue until markets have had a chance to assess the election results.

The pound has been trading in a narrow range as markets await the release of CPI (Consumer Price Inflation) data which is due later today. The report is expected to show that inflation in May has moved back to 2.0% vs April’s reading of 2.3%. In addition to inflation data, Thursday sees the BoE setting interest rate policy which will increase volatility for the pound. No change in rates is expected by markets.

Retail sales data released in the US yesterday disappointed, growing at a slower pace of 0.1% vs expectations of 0.2%. The weaker than expected figure has increased the likelihood of 2 interest rate cuts by the Federal Reserve this year. Markets now expect the first cut in September and second in December and as such could weigh on the US dollar over the short term.

Expected Ranges

  • GBP/USD: 1.2700 - 1.2750 ▼
  • GBP/EUR: 1.1825 - 1.1875 ▼
  • GBP/AUD: 1.9050 - 1.9100 ▼
  • EUR/USD: 1.0710 - 1.0760 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.