Another week, another chance to trade the Greenback! Let’s take a look at the catalysts that might move the scrilla over the next couple of days.
U.S. retail sales (Aug. 15, 12:30 pm GMT)
A positive retail sales release helped push the Greenback higher last month. See, retail sales showed a 0.5% increase when analysts had only expected a 0.4% uptick in June.
This week analysts expect to see only a 0.2% growth in retail purchases. Core retail sales, which excludes volatile items such as automobiles, is expected to maintain its 0.4% increase in July.
Remember that consumer spending, which is more or less based on retail purchases, makes up about two-thirds of Uncle Sam’s economy.
Stronger-than-expected numbers for July (or revisions to June’s numbers) would help prop the Greenback higher, while significantly weak figures could take away some of the dollar’s recent gains.
Trade war updates
Unless you’ve been too busy defending Elon Musk and Tesla on social media, then you should know that the Trump administration has been busy making trade deals (and threats) lately.
First up is the U.S.’ row with China, which escalated after the administration slapped tariffs on an additional $16 billion worth of Chinese goods and which resulted a reciprocal move from the world’s second largest economy.
Turkey, Russia, and Iran’s economies also bore the brunt of the U.S.’ pressure. Oil prices shot higher after the U.S. reimposed its sanctions on Iran; additional tariffs and a local currency that’s on an all-time low have plunged Turkey into an “economic war,” and Russia is now lightening its U.S. investments after it saw additional sanctions from the U.S.
Last but definitely not the least is Canada, which Trump threatened with tariffs on its cars if Canadian leaders don’t get on board with a favorable NAFTA deal.
Deal with Mexico is coming along nicely. Autoworkers and farmers must be taken care of or there will be no deal. New President of Mexico has been an absolute gentleman. Canada must wait. Their Tariffs and Trade Barriers are far too high. Will tax cars if we can’t make a deal!
— Donald J. Trump (@realDonaldTrump) August 10, 2018
Who needs Hollywood when we can get more drama from world leaders, amirite? Stay tuned and don’t miss an episode of Trade Wars: Global Edition!
Last Week’s Price Review
The Greenback will soon mark is second week of net gains since the Greenback is currently in second place after outpacing the Swissy (as of 5:00 pm GMT).
Most USD pairs were actually trading somewhat sideways for most of the week and only began trading broadly higher on Thursday.
Having said that, the Greenback had a running start. There were no catalysts on Monday, but as mentioned in Monday’s London session recap, market analysts were attributing the Greenback’s strength to safe-haven flows because of lingering trade-related jitters.
The Greenback stumbled on during Tuesday’s London session, though, supposedly because of profit-taking since the Greenback’s trade-induced rally is supposedly seen as overdone already.
However, the Greenback would regain its footing when Tuesday’s U.S. session rolled around. No clear reason why, though.
The U.S. confirmed that it will push through with plans to impose a 25% tariff on $16 billion worth of Chinese goods and that the tariffs will take effect on August 23.
However, that didn’t seem to have a noticeable impact on the Greenback. In fact, the Greenback even began to slip during Wednesday’s Asian session, probably because traders who loaded up on the Greenback as a safe-haven were using that news to unwind some of their positions.
Trade war fears may have eventually sent fresh safe-haven flows towards the Greenback, though, since USD pairs were tilting broadly to the upside again during Wednesday’s London session.
However, the Greenback weakened during Wednesday’s U.S. session and that may have been due to U.S. growth related worries since China announced tit-for-tat tariffs of its own, also effective on August 23.
The Greenback then had a more mixed performance on Thursday but buying pressure began to manifest since most USD pairs were beginning to tilt slightly to the upside. And buying pressure became more apparent and broad-based during Thursday’s U.S. session.
As noted in Thursday’s U.S. session recap and as marked on the overlay of USD pairs, Chicago Fed President Charles Evans hawkish comments helped to provide lift for the Greenback.
However, there was already broad-based buying pressure on the Greenback before Evans spoke. And according to some market analysts, that’s because of renewed safe-haven demand for the Greenback since the prevailing view is that the U.S. economy is more likely to weather a trade war (or wars).
The Greenback also got a bullish boost when the Financial Times released a report during the Friday’s late Asian session, claiming that ECB members were getting worried about the exposure of E.U. lenders to the ongoing troubles in Turkey, which may lead to a contagion effect in the Euro Zone.
Some of those safe-haven flows eventually made their way to the Swissy and the yen, however, since the Greenback had a tough time advancing against those two currencies.
The Greenback did get a final bullish boost at around 3:00 pm GMT, which enable to Greenback to score a win against the Swissy. No clear reason for that, though.