AUD Retail Sales better than forecast
EUR French Consumer Confidence worse but CPI higher
GBP GFK reading slips -7 form -5
USD Personal Income and Spending on tap
Both the euro and the pound continued their ascent on new yearly highs in early European trade tonight with the pound actually achieving that goal as the unit hit a new record of 1.9580. But cables phenomenal run may have hit the wall of reality as both GFK survey of consumer sentiment and CBI Distributive Trades figures printed lower than expected suggesting that UK consumer demand may have peaked. The GFK survey dropped to -7 from -5 expected with the Climate for Major Purchases subcomponent slipping to 1 from 6 the month prior. Meanwhile the November reading of CBI Distributive Trades fell to -9 from 2 forecast as retail sales declined to their lowest level since March. The soft CBI data, along with the surprisingly weak GFK consumer confidence results, does not bode well for sales during the important Christmas season and puts into question the need for further rate hikes by the BoE. The market however shrugged off this news for the time being as anti-dollar sentiment continued to dominate trade with the pound hovering near its highs for the day.
Dollar bears however did receive support from Europe today, as Euro-zone inflation showed acceleration while GDP printed at 2.7% - higher than the 2.2% reading from US yesterday. Furthermore German unemployment contracted by -86K - much better than the -30K expected estimate. The data confirms the euro longs argument that despite the higher exchange rates, the export driven region is experiencing organic growth which justifies ECBs continued hawkish posture.
The rest of the day however, may pivot on US data which includes several important releases including the PCE deflator which is the Feds favorite gauge of inflation and Personal Spending and Personal Income figures. Much of the debate between dollar bulls and bears has centered on the US consumer. The bulls argue that low unemployment and faster wage gains will support better US economic growth going forward while the bears contend that any rise in income will be minimal relative to the loss of wealth due to the slowdown in housing, If todays releases do surprise to the upside, they may temper some the current anti-dollar sentiment in the market and could start a retrace in one way price action seen so far this week.
