Sterling falls after weak retail sales data

It was a sea of green in the global stocks market as investors cheered yesterday’s report on China-US trade talks. A media report said that the US trade negotiators were considering lowering Chinese tariffs with the aim of incentivizing China to make tougher concessions. The report was denied by Steve Mnuchin’s office. Such a move would present a huge relief for the financial market, which is still scared about a prolonged trade war. In Asia, the Shanghai composite index and the Nikkei gained by 35 and 265 points respectively. In Europe, the FTSE, DAX, and Stoxx gained by 105, 185, and 50 points respectively. US futures gained too, with the Dow and S&P gaining by 155 and 10 points respectively. Further, the price of commodities rose too, with the main losers being gold, silver and natural gas.

The sterling declined against the USD after a few days of gains. The decline was attributed to the weak data released today. The headline retail sales in the UK rose by 3.0% in December. This was lower than the expected 3.6%. On a MoM basis, the sales declined by 0.9%. The core retail sales, which strips the volatile food and energy products rose by an annualized rate of 2.6%. This was much weaker than the 3.9% traders were expecting and November’s 3.5%.

The Swiss franc declined slightly against the USD after data showed some weakness in the PPI numbers. In December, the PPI increased by an annualized rate of 0.6%, which was lower than the previous 1.4%. On a MoM basis, the PPI declined by minus 0.6%. This year, data from Switzerland has shown some weakness in the country’s economy, which could mean a lower franc for longer. Meanwhile, in Japan, data showed that national consumer prices had declined in December to 0.3%. On a positive note, the industrial production improved slightly to minus 1.0%. This was better than the expected contraction of 1.1%. In Canada, the data from the statistics office showed that the headline CPI number rose by 2.0% in December. This was better than the expected 1.7% and in line with the BOC target.

EUR/USD

The EUR/USD pair rose slightly as traders cheered the progress on trade talks. It reached a high of 1.1410. This price was higher than the weekly low of 1.1370. On the hourly chart below, the pair’s price is above the 21-day and 42-day EMAs, which are making a crossover. This could be an indication that a sustained rally is on the horizon. This is confirmed by the ATR, which has fallen to multi-weekly lows and the RSI, which is slightly below the 70 level. If the upward momentum goes on, traders should watch out for the 1.1440, which is along the 50% Fibonacci Retracement level.

GBP/USD

The GBP/USD pair has been rising since Tuesday when the UK parliament voted on Brexit. The pair reached an intraday high of almost 1.3000. Today, it gave up some of the gains and declined to an intraday low of 1.2925. On the four-hour chart below, the price is above the three-week and the six-week moving averages, while the RSI remains slightly below the overbought level of 70. The momentum indicator has eased to the neutral level of 100. While the pair could resume the upward trend, traders should be careful about the volatility of the UK.

USD/CHF

Since Tuesday last week, the USD/CHF pair has been rising. It has risen from a low of 0.9716 to a YTD high of 0.9955. The pair is now trading along the 0.9935 level. On the hourly chart, the price is along the three-week moving average but higher than the 42-day EMA. The RSI has moved from the overbought level of 70 and has declined to the current 53. There is a possibility that the pair will decline to test the 61.8% Fibonacci Retracement level of 0.9863.