Article Hero

Upbeat retail sales report provides support for the Euro - Market Overview

1618309430.png
Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The retail sales figure (MoM) for February in the euro area took the markets by surprise with a growth of 3% compared to the 1.5% expected and the -5.2% decrease of the previous month.

This result seems to be a positive sign if we look at the European authorities' lockdown measures during this period.

After the retail sales numbers came out, the euro recovered all the territory previously lost, surpassing the 1.1900 area.

The markets in general, not only the currency, remain very stable without large movements that define trends. In this sense, it will be interesting to see the result of this afternoon's Core CPI for March in the U.S. An increase of 0.2% is expected, one-tenth above the data of the previous month but still, still very contained. Of course, any figure higher than expected could lead to an increase in inflation expectations and with this, the market could expect even more the first hike in interest rates.

The assets that continue to be pressured down, for this reason, are U.S. Treasury Bonds.

The 10-year benchmark, Tnote, the price dropped again, and it is now close to the previous low of 130.83, which would correspond to a yield of 1.77%, currently at 1.67%.

If the U.S. Treasury Bond Yields' upward movement continues, the Dollar will carry on its upward momentum, putting downward pressure on the pairs that trade against the Dollar.

An interesting pair in this regard from a trading point of view is the AUD/USD. Technically it has broken down a reversal pattern that, if confirmed, would have a theoretical target in the 0.7270 area.

At the moment, it remains in a lateral movement below the neckline and would need to continue to decline for the U.S. dollar to strengthen. This could happen if long-term interest rates continue to rise, and we witness a further downward correction in the stock markets with which the Australian currency is highly correlated.

Sources:  Bloomberg, Reuters.com.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

Share this article

How did you find this article?

Awful
Ok
Great
Awesome

Read More

Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.