Retail sales is a USD tailwind
The big story of the day in the economy is the improvement in US retail sales and the continued trouble in German manufacturing. That's sank the euro by 63 pips to 1.1233. It's also giving the US dollar a broad lift and it's carving out fresh session highs against the pound and Australian dollar as well.
The retail sales report showed the control group up 1.0% compared to +0.4% expected and was enough to convince even the bears at Capital Economics that there's genuine improvement.
"The retail sales figures add to the slightly more positive tone of the recent data and provide some comfort that the economy isn't falling off a cliff," they wrote, noting that the control group had now recovered from the sharp drop in December.
For the dollar more broadly, it continues to be a crowded trade with specs hitting long-term extremes but other currencies aren't giving it a reason to take a break. One exception is in the UK where retail sales earlier today were very strong but the market shrugged. That's a surprise to me considering it was the third straight rise.
Instead, flows and Brexit worries have kept GBP on the defensive and it's now below 1.3000. The drift of the cable chart doesn't look great but there's a good risk reward with stops below 1.2950.
