US session review: Weak US data dragged Dollar down

Data released: 

13:30 GMT Canada New Housing Price Index (YoY) (Dec) 1.3% _ 1.4% 

13:30 GMT Canada New Housing Price Index (MoM) (Dec) 0.1% 0.1% 0.0% 

13:30 GMT USA Initial Jobless Claims (Feb 7) 339K 330K 331K 

13:30 GMT USA Retail Sales (MoM) (Jan) -0.4% 0.0% 0.2% 

13:30 GMT USA Retail Sales ex Autos (MoM) (Jan) 0.0% 0.1% 0.7% 

15:00 GMT USA Business Inventories (Dec) 0.5% 0.5% 0.4%

The dollar fell after the US data released. 

The Commerce Department on Thursday said retail sales saw a seasonally-adjusted drop of 0.4% in January. Economists had forecast retail sales to fall 0.1% overall.

Weekly jobless claims rose by 8,000 to a seasonally adjusted 339,000, compared with the total claims of 330,000 expected by analysts.

Goldman Sachs has lowered its first quarter US GDP estimate to 1.9% from 2.3%. Economists at the firm also see Q4 2013 GDP revised down to 2.4% compared to 3.2% reported on January 30. Both come after the disappointing US retail sales data today. From Goldman: The January retail sales report was a significant disappointment, compounded by negative back revisions. Adverse weather was likely a substantial contributor to the weaker January figures.

EURO

The euro consolidated near session highs.

The ECB says that data from the Survey of Professional Forecasters indicates a sharp downward revision for HICP in 2014 to 1.1% from a previous estimate of 1.5%. The estimate for 2015 was also lowered to 1.4% from 1.6%. The fresh 2016 forecast was pegged at 1.7% and the long-term estimate was left unchanged at 1.9%.

EUR/USD recovered from $1.3560 to the initial resistance at $1.3680, extending to $1.3740 (Jan 24 highs).The initial support remains at recent lows on $1.3550 (Feb 2 lows), then - at $1.3480. Below support comes at $1.3400 (Nov 21 lows).

POUND

The pound continues to rise as markets digested the U.K. central bank’s upward revisions to its economic growth forecast this year.

The Bank of England on Wednesday raised its growth forecast of the U.K. economy to 3.4% this year, up from a previous projection of 2.8%. The central bank also said the unemployment rate has fallen faster-than-expected and is likely to reach the 7% threshold by the spring of this year.

The bottom line is that while the general view remains of a risk of a BOE rate hike in Q1 2015, many observers and investors see heightened risk of an earlier hike, as in late 2014. The market went into this week thinking that it was a close call who would raise rates first the Fed of the BOE, Yellen seemed ultimately more convincing than Carney.

GBP/USD extended gains and remains higher. Resistance comes at Jan 24 highs on $1.6670, then - near $1.6750 (channel line from Oct1’2013). The initial support comes at session lows on $1.6600, below - near $1.6500 (yesterday’s hourly lows).

YEN

Yen retreated after it rally in Europe.

USD/JPY consolidates near Y102.20, lower the initial resistance at Y102.70 (yesterday’s high). Above resistance comes at Jan 31 high on Y102.90/00, then - at Y103.40 (Jan 28 high). Initial support comes at Y101.20 (Feb 6 lows), then - at Y101.00.

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