USD declines as US retail sales falls to record low
Global stocks soared today as the market reacted to the mixed economic data from China. In a report earlier today, the country’s statistics office showed that industrial production rose by 3.9% in April. This was better than the expected increase of 1.5%. The country’s unemployment rate rose to just 6.0% (compared with the US’ 14.5%). On the other hand, the fixed asset investments dropped by more than 10% while retail sales declined by more than 6%. These numbers show that China is making a comeback after the decline seen in the first quarter.
The euro rose today even after the relatively weak economic data from Europe. The numbers showed that the eurozone economy contracted by 3.8% in the first quarter. This was in line with the first reading and what analysts were expecting. The economy slumped by 3.2% year on year. According to Eurostat, while all EU member states contracted, the worst-performing countries were Spain, Italy, and Portugal, whose economies contracted by 4.7%, 4.5%, and 3.9% respectively. Germany, the region’s powerhouse contracted by 1.9% year on year.
The US dollar weakened today after a set of disappointing data from the United States. Data from the statistics office showed that retail sales contracted by 16.4% in April. This was the worst monthly decline ever recorded and was primarily because most people in the US were at home in April. The headline sales fell by a record 21.6% year on year. Meanwhile, the core retail sales number that excludes the volatile food and energy contracted by 17.2% in the month. In the same month, the New York manufacturing index fell to a low of -48.50 from the previous -78.9.
The XAU/USD pair rose to an intraday high of 1740, which is just seven points below the YTD high. On the daily chart, the pair has moved above the bullish pennant pattern that was forming during the week. Also, the price is above the short, medium, and long-term moving averages. Therefore, there is a likelihood that the pair will continue rising as bulls attempt to move to the all-time high of 1900.
The EUR/USD pair was little moved today as the market reacted to the US retail sales data and EU slowdown. On the four-hour chart, the price is stuck at the 50-day and 100-day EMA and below the 23.6% Fibonacci retracement level. The volatility, as measured by the Average True Range (ATR) is at the lowest level since last week. The pair may see a significant jump after the US releases the manufacturing production data.
The GBP/USD pair declined slightly after it emerged that the third round of Brexit talks had hit a wall. The pair is now trading at 1.2195, which is the lowest it has been since April 7. On the four-hour chart, the price is between the 50% and 38.2% Fibonacci retracement level. It is also below the neckline of the head and shoulders pattern that has been forming. Therefore, the pair may continue to decline as bears remain in control.